It's the beginning of Cloud 2.0

Summary of It's the beginning of Cloud 2.0

by Massive Studios

21m•January 18, 2026
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Overview of It's the beginning of Cloud 2.0

In this weekend perspective episode of The Cloudcast (Massive Studios), hosts Aaron Delp and Brian Gracely reflect on signals that 2026 marks a transition from “Cloud 1.0” into a new era — call it Cloud 2.0 or the AI cloud era. Prompted by Corey Quinn’s postmortem on AWS re:Invent and a Software Defined Talk discussion, they argue that the old cloud narrative (everything in one public cloud controlled by a single vendor, driven by infrastructure primitives) is breaking down. The new era is defined by AI-first priorities, multi-cloud and on‑prem realities, data sovereignty, latency-driven architectures, and a shift from primitive building blocks toward immediate, experience-first AI products.

Key takeaways

  • 2026 feels like the end of Cloud 1.0 and the beginning of Cloud 2.0 (AI cloud era).
  • AWS has effectively admitted that workloads will run outside its cloud (multi-cloud and on‑prem persist).
  • Public cloud is no longer the sole model — sovereignty, latency, and geopolitical factors keep significant workloads on-prem or regionally constrained.
  • Competition is shifting: Google Cloud (AI/data capabilities) is a much stronger challenger to AWS than historically perceived; Azure and others remain relevant.
  • The market is moving from infrastructure primitives to experience-driven AI applications/agents that deliver immediate impact.
  • Heavy CapEx for GPUs/AI compute may entrench hyperscalers, but niches (e.g., DigitalOcean, Vercel-like players) could still carve durable positions.

Themes discussed

Hybrid & multi-cloud are reality

  • AWS and others are acknowledging customers will run workloads across multiple clouds and on-prem systems; the one-cloud vision didn’t fully materialize.

Data sovereignty and geopolitics

  • Growing concerns about digital sovereignty and regional control of data influence cloud architecture decisions and the feasibility of a single global cloud model.

AI as the new battleground

  • AI changes the value equation: data, models, and latency matter more than raw IaaS. Google’s strengths in data and specialized hardware (TPUs) position it strongly.

From primitives to experiences

  • Cloud 1.0 favored APIs and building blocks; Cloud 2.0 favors immediate, experimentable AI experiences (applications, agents) that provide impact now, not just the plumbing to build them.

Economics and competitive posture

  • Hyperscalers are diverse businesses; evaluating them by pure IaaS revenue is increasingly insufficient. Relationships and cross‑business integration matter.
  • Large CapEx investments in GPUs may reinforce a smaller set of dominant providers, but opportunities exist for specialized/niche providers.

Implications for major vendors

  • AWS: Still the largest and highly profitable, but the “most innovative infrastructure-first” narrative may be waning. Reinvention is hard when existing cash flows depend on continuing the old model.
  • Google: Emerging as a top contender in the new era because of data, ML expertise, and hardware advantages.
  • Azure & others: Remain competitive; enterprise ties and broader product portfolios will influence outcomes.
  • Smaller clouds / niche players: May survive by focusing on developer experience, vertical specialization, or being the better host for certain workloads.

Recommendations / Action items for buyers and builders

  • Reassess priorities: match provider choices to latency, data locality, and sovereignty requirements (not just lowest-cost IaaS).
  • Emphasize experience: prefer platforms and vendors that deliver immediate AI application/agent experiences, not just primitives.
  • Plan multi‑cloud and hybrid strategies proactively — assume some workloads will remain on‑prem or regionally bound.
  • Negotiate AI compute and data access terms explicitly (TPU/GPU pricing, storage/egress, model access).
  • Watch partnerships and integrations across vendors; broader vendor relationships can be as important as raw IaaS metrics.

What to watch next

  • AWS strategic moves to pivot from primitives to AI experience (product launches, acquisitions, bundling).
  • Google Cloud AI product roadmap and TPU/GPU supply advantages.
  • Azure’s AI and hybrid plays (integration with Microsoft apps/business units).
  • New entrants or big non-cloud companies (Meta, regional hyperscalers, sovereign cloud providers) investing in AI compute.
  • Startups and platforms delivering “immediacy” — agent platforms, vertical AI apps, and developer-first AI tooling.
  • Regulatory and geopolitical developments that reshape where data and compute must live.

Notable quotes (paraphrased)

  • “Maybe it’s time to pour one out for Cloud 1.0.”
  • “AWS has admitted people are going to run things outside the AWS cloud.”
  • “The world isn’t just public cloud — a lot of stuff stays on-prem.”
  • “AI gives us an immediacy of impact that’s different from the immediacy of interaction we got from SaaS.”
  • “It’s really, really hard to invent a second great act.”

This episode frames 2026 as a turning point: cloud infrastructure remains critical, but the center of gravity is moving toward AI, data locality, and experience-first products. The next few years will show whether incumbents can reinvent or whether new leaders and niche specialists take the mantle.