How Microsoft Beat Amazon in 4Q17



Amazon leads, but Microsoft gains momentum in cloud space

Earlier in the series, we saw how the recent acquisition of Avere Systems could complement Microsoft’s (MSFT) cloud capabilities as well as its cloud strategy. Citing a KeyBanc analyst, CNBC reported last week that Amazon (AMZN), the undisputed leader in the cloud space, lost market share in 4Q17 in the public cloud space. Amazon’s AWS (Amazon Web Services) had a 62% market share in 4Q17 compared to 68% in 4Q16. On the other hand, Microsoft’s Azure market share rose from 16% in 4Q16 to 20% in 4Q17, indicating that the company’s cloud offering continued to gain momentum. Google’s market share rose from 16% to 20% in 4Q17.

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Microsoft: King of the cloud

Microsoft doesn’t provide a breakdown of Azure’s revenues. In fiscal 1Q18, Azure grew 90%. Research firm Canalys estimates that Azure generated $2 billion in revenues for Microsoft.

Microsoft’s Azure grew close to two times more than Amazon’s AWS at 45% growth that same quarter. AWS became a $4.8 billion business in 3Q17. CNBC reported in October 2017 that Azure’s revenue growth has exceeded AWS’s growth for at least eight consecutive quarters.

According to KeyBanc analysts, Azure has probably contributed $3.7 billion to Microsoft’s fiscal 2017 revenue of $96.6 billion. Citing KeyBanc, TheStreet wrote, “The sheer size and accelerating pace of cloud growth increases our confidence in the bull-case scenario that Microsoft Cloud can quickly scale north of a $50 billion segment by 2021.”


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