Enterprise AI spending isn't lifting all boats

Welcome to Runtime! Today: AWS and Microsoft were on opposite sides of Wall Street's expectations during the first quarter of the year, Redis returns to open source more than a year after a Big Cloud fork, and the latest enterprise moves.

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Calm before the storm 

Worries that the chaotic first 100 days of the second Trump administration dented first-quarter enterprise tech spending didn't come to pass over the last two weeks of earnings results. There was, however, some separation between the major players as everyone braces for the impact of the huge pullback in global trade bound for the U.S. later this year.

The two largest cloud providers both reported a solid increase in revenue compared to the previous year, with AWS growing 17% to $29.27 billion and Microsoft Azure growing 33% to some back-of-the-envelope revenue number around $20 billion (based on Synergy Research market share figures, because after all these years Microsoft still refuses to allow the public to make a direct comparison between Azure and AWS). But while Runtime was inclined to give AWS the benefit of the doubt in February after its Q4 revenue only missed analyst expectations depending on the style guides of various financial media companies, this time around Wall Street was expecting $29.42 billion.

• AWS appears to be trading revenue for profit, as its operating income surged 22% to $11.55 billion, which CNBC said was nearly a billion more than Wall Street was expecting for that category.
• That 17% revenue growth figure was the smallest in almost a year for AWS, back when it appeared to be turning the corner out of the enterprise-tech spending doldrums that affected pretty much everyone in 2023.
• AWS suffered from the law of large numbers problem long before it crossed the $110 billion a year revenue run rate this quarter, but the whole cloud infrastructure market is starting to get pretty big, and AWS is growing slower than it would like.

Meanwhile, Microsoft enjoyed one of its best quarters in some time thanks to Azure, which exceeded Wall Street's estimates for growth by a sizable margin. Its stock rose 7.6% on Thursday after it released those earnings numbers Wednesday afternoon.

• The company attributed 16 percentage points of Azure's growth to AI services, up from 13 points during the last quarter.
• Microsoft also appears to have figured out how to improve sales of non-AI services during the quarter, which was a problem the last time around.
• "Focused execution drove non-AI services results where we saw accelerated growth in our enterprise customer segment as well as some improvement in our scale motions," CFO Amy Hood said during Wednesday's earnings call.
• And Hood also forecast Azure growth of 35% during the current quarter, which was again higher than the wizards of Wall Street were hoping to see.

There's simply no way to know how U.S. businesses will react to the finding-out stage of the Trump administration's tariff policies, which logistics experts believe will start to hit the U.S. economy over the course of May. Layoffs, inflation, and supply-chain shortages are all on the table, and depending on the magnitude of the impact cloud customers could have very different priorities over the second half of 2025.

• Microsoft CEO Satya Nadella put on a brave face: "I think if you buy into the argument that software is the most malleable resource we have to fight any type of inflationary pressure or any type of growth pressure where you need to do more with less, I think we can be super helpful in that," he said Wednesday during the earnings call.
• Outsiders aren't so sure: "The tariffs are likely to create demand destruction, which means cutbacks on software and cloud spending," Quilter Cheviot's Ben Barringer said last month, according to Reuters.
• Still, it appears that Microsoft is more confident about the second half of the year than AWS, and if enterprise tech is finally ready to implement generative AI technology to help it cut costs, Microsoft's early investments could start to pay real dividends.

Check out the latest edition of the Runtime Roundtable, which in honor of RSA this week focused on security. We asked our panelists for their thoughts on the best ways to make sure companies that feel a sense of urgency to ship generative AI applications ensure that security doesn't get left behind, and selected the nine best responses.

Stay tuned for the next edition, which will most likely focus on data as attention turns to Snowflake and Databricks in early June. And if you're interested in sponsoring a future edition of the Runtime Roundtable, contact us here to learn more.

Time is a flat circle

Redis announced Thursday that it will once again offer its core software under an open-source license, more than a year after it adopted the so-called "source available" SSPL in hopes of drumming up more revenue. According to CEO Rowan Trollope, that decision "hurt our relationship with the Redis community," and the return of Redis creator Salvatore Sanfilippo last December seems to have spurred the company to get back to its roots.

"I’ll be honest: I truly wanted the code I wrote for the new Vector Sets data type to be released under an open source license," Sanfilippo wrote Thursday, referring to the release of Redis 8. The new version will be released under the AGPL license, which is a bit more restrictive than a license like Apache 2.0 in that it requires anyone who modifies the code to release it back to the community, but unlike the SSPL it has been endorsed by the Open Source Initiative. 

Shortly after Redis announced its decision to adopt the SSPL, several former Redis maintainers launched the Valkey project under the MIT license, and deep-pocketed companies like AWS and Google quickly pledged their support. Trollope claimed that was the goal of the license change all along — to prevent Big Cloud from simply using Redis for their own managed (and expensive) services without contributing anything back to the project — but it's clear that Valkey was gaining a lot of momentum among companies uninterested in paying for something that was once available to them for free.

Enterprise moves

Bryan Palma is the new president and CEO of KnowBe4, joining the cybersecurity company after serving as CEO of Trellix.

Dan Springer is the new CEO of Ironclad, following several years as CEO and board member of DocuSign.

Rod Squires is the new CEO of Cloudbolt, joining the FinOps company after serving as the CEO of Stormforge, which was acquired by Cloudbolt in March.

Sol Rashidi is the new chief strategy officer for data and AI at Cyera, joining the data security company following a year at AWS.

Marcio Arnecke and Adam Carr are the chief marketing officer and chief revenue officer, respectively, at Apollo.io.

The Runtime roundup

Synadia and the CNCF reached a formal agreement to transfer two NATS-related trademarks to the CNCF, after Synadia CEO Derek Collison told Runtime earlier this week it planned to do so in order to end the standoff.

Fivetran acquired Census, a prominent data-management company that specializes in Reverse ETL, for an undisclosed amount.

AWS is working on an AI coding assistant that could compete with Cursor and Windsurf, according to The Information, as one of the fastest-growing uses of generative AI continues to get traction.

Oregon State University's Open Source Lab, which played an important role in the early days of open source software, is in danger of closing amid "recent changes in university funding" and is looking for $250,000 to help close the gap.

Thanks for reading — Runtime is off for the weekend, see you Tuesday!