Amazon, Microsoft, and Intel all had reason to cheer Friday.
Shares of these three tech giants were all booming after they reported earnings on Thursday that impressed investors.
Amazon’s shares were up nearly 13% Friday to $1,100.95 while Microsoft’s shares jumped 6% to $83.81. Intel’s shares rose 7% to $44.40.
Although these companies all have different business models, they share a common link—cloud computing, in which companies buy computing resources on-demand.
Amazon’s (AMZN) retail business is still the company’s primary cash cow, but its thriving Amazon Web Services unit is still growing at a rapid pace. AWS sales grew 41.9% to $4.58 billion, which was higher than analyst projections of $4.52 billion.
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Meanwhile, Microsoft (MSFT) claimed big gains in its cloud business, with CEO Satya Nadella boasting to analysts that the company has an annualized revenue run rate of $20.4 billion that is extrapolated from one recent month’s sales multiplied by 12.
Intel (INTC) also bragged that cloud computing helped sales in its latest quarter. While Intel does not sell on-demand computing services, it sells computer chips to cloud computing companies like Microsoft and Amazon. When those companies grow and spend big money in their data centers, Intel stands to benefit—as long as they keep buying from the semiconductor giant and not rivals like Nvidia.
Intel said its data center business jumped 7% to $4.9 billion in the company’s third quarter. Intel CEO Bryan Krzanich boasted to analysts during an earnings call of recent chip deals between Microsoft, Google, and Chinese e-commerce giant Alibaba, also a cloud provider, as highlights.
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Still, Intel’s data center business is heavily dependent on the cloud computing companies it sells its technology to, and Krzanich has previously said that sales to those businesses can be “lumpy,” meaning that its hard to predict their data center spending. That can impact Intel’s ability to achieve its sales projections.
Additionally, Intel faces the potential threat of these companies designing their own chips, as in the case of Google, which built a custom chip for machine learning to which it rents business customers access. Any effort by these cloud companies to build their own chip tech, even if they use for just a small part of their overall data centers and cloud businesses, could cause Intel to lose out on sales.
As for Google and its parent company Alphabet, cloud computing business is growing—although the company did not provide detailed quarterly information about the unit’s financial performance because of its relatively small size. But as Alphabet’s CFO Ruth Porat told analysts after reporting stellar quarterly earnings, she expects that cloud computing will be crucial to its business in the future.
To underscore that point, Porat said Alphabet’s workforce at the end of its latest quarter was 78,100, up 2,495 from the previous quarter. The bulk of hiring was in the company’s cloud unit.
Update (Oct. 27, 2017): This article was updated with closing stock prices.
