Cloud: A common source of growth for Amazon, Microsoft — 4 notes

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Amazon and Microsoft are two of the world's most valuable companies, and they have one common growth engine compared to their "big tech" peers — cloud services, according to the Wall Street Journal.

Five notes:

1. Amazon is the most valuable company in the world as of market close Jan. 11 at $802.6 billion. Microsoft trails not far behind at a market value of $786.7 billion, while the third most valuable company, Alphabet, sits at $736.8 billion.

2. Technology firms such as Apple, Facebook and Alphabet are experiencing costs rising faster than their revenues. Many technology companies are expected to report earnings growth that lags behind revenue growth in their fourth-quarter earnings, which companies are releasing in the coming months.

3. Amazon and Microsoft, despite being companies with two drastically different businesses, are two exceptions to this trend. Amazon is expected to report a 74 percent increase in operating earnings for the fourth quarter of 2018, and Microsoft's operating income is expected to have risen 18 percent.

4. Amazon and Microsoft's common "growth engine" is their roles as public cloud service providers, according to WSJ. Between the two companies, the public cloud business has generated almost $50 billion a year in revenue — a figure that's expected to double by the end of 2020.

5. It's likely Amazon and Microsoft will be able to maintain this market redge, since CIOs are planning to move more computing tasks to public clouds this year, according to a recent Goldman Sachs survey cited by WSJ, even though corporations are also bracing for a downtick in technology spending.

"Keeping up that momentum will be key to both companies maintaining their towering market values," according to the analysis in WSJ. "A growing cloud is still a pretty safe bet for investors."

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