Amazon’s quarterly earnings report, released Thursday, included $1.8 billion in revenue from Amazon Web Services, the company’s cloud infrastructure. That number is nearly identical to the quarterly cloud revenue Microsoft reported two days earlier, but that doesn’t mean Microsoft is gaining ground on its top commercial cloud competitor.
Microsoft’s cloud brought in more than $1.7 billion, an 88 percent year-over year jump. It’s an impressive leap, one greater than Amazon’s 81 percent growth, but to say Microsoft’s cloud infrastructure, Azure, is nearing parity with AWS would be misleading. AWS has more than 1 million customers and commands an estimated 28 percent of the cloud market. By comparison, Azure’s market share is estimated to be 10 percent, and COO Kevin Turner said the company’s cloud services have just 75,000 customers.
So why do Amazon and Microsoft have such similar cloud revenue figures if AWS is the clear leader in the sector? Microsoft’s reported cloud revenue includes applications such as Office 365 and Dynamics CRM Online in addition to Azure, which invalidates a direct comparison between the competitors’ cloud figures. Take Office 365 and Dynamics out of the equation, and AWS’ dominance becomes clearer. Deutsche Bank estimates that Azure brings in less than $200 million a quarter, or about a tenth what AWS does.
That Azure revenue is diminutive compared with AWS doesn’t mean Microsoft’s cloud business is in trouble, though. Azure is still far ahead of other cloud infrastructures, and Microsoft’s cloud revenue is more diversified than is Amazon’s. But if Amazon ever introduces apps that work seamlessly with AWS, it has more than a million customers who could switch to a unified Amazon package. That could spell trouble for Office 365, which grew its subscriber base by 25 percent this quarter.
From a cloud infrastructure standpoint, AWS likely expanded its lead over Azure. This does not negate the valuable progress that Microsoft’s cloud business has made over the past quarter. Even if Azure is a ways behind AWS, Microsoft’s overall commercial cloud has nonetheless achieved immense growth in the second quarter, showing potential for a better future.