Key Points
Microsoft (NASDAQ: MSFT) reported strong earnings driven by robust growth in its Azure cloud segment, which is now gaining ground on Amazon’s (NASDAQ: AMZN) AWS.
While AWS remains the global market leader, Microsoft’s consistent enterprise adoption and improving margins suggest it could eventually overtake Amazon in cloud market share.
The divergence in cloud performance highlights a potential leadership shift in the infrastructure-as-a-service sector, with Microsoft benefiting from early enterprise pricing strategies and AI integration.
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Transcript:
[00:00:04] Doug McIntyre: So at least something interesting happened. I looked at the Microsoft earnings and what I we’re good, what I call Azure, which is their primary cloud business, right? Extraordinarily well, very well. We’re considered number two in the market in terms of market share. I’m not gonna walk across the aisle and look at AWS, the division of Amazon, which is their cloud business, which is by most measures the number one cloud business for market share in the world.
[00:00:35] Doug McIntyre: Those two things are going in the opposite direction, and they’re not going in a direction that’s good for Amazon.
[00:00:41] Lee Jackson: Yeah, and it was, it was somewhat surprising because, there was two companies with great numbers, Microsoft and, Alphabet and then, Amazon. And Apple to some degree suffered, on the other end.
[00:00:55] Lee Jackson: So yeah, it, it was kind of a kinda, it’s interesting that [00:01:00] that Azure or Azure, however it’s pronounced, had such a surge over the last two quarters.
[00:01:07] Doug McIntyre: Well, I, I think one of the things that’s happening and investors ought to look at this is you go from sort of the legacy tech business, which was, computers, servers, you, you could move into cloud about 10 years ago when Bezos decides that he’s going to use his server farms for Amazon e-commerce and he’s gonna lease out space on those.
[00:01:30] Doug McIntyre: So you have the birth of cloud AI is the next product for all these. Yep. Still at that bridge point. you’re not all the way to where you’re seeing AI priced into earnings because they can say a lot about AI was this amount of money. So people are still focusing very, very heavily on cloud revenue and the number one and number two, cloud providers are now moving in the opposite [00:02:00] directions.
[00:02:00] Doug McIntyre: Yeah. And I can see Microsoft moving towards number one in terms of global cloud market share.
[00:02:10] Lee Jackson: Well, that would be something that would surprise most of the people on Wall Street, but I don’t think it’s out of the question. for years, Doug, we wrote about this five years ago, when they were building Azure out, it’s, they were always really discounting at the enterprise level.
[00:02:28] Lee Jackson: To get new companies. And I think they got to a point where they didn’t have to discount anymore. And that could have been, people were saying, Hey, we like the application and the way everything works through our enterprise system. We like Microsoft and maybe they get a discount on other items and who knows.
[00:02:44] Lee Jackson: But I mean, it is kind of a stunning shift.
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