Cloud Revenue Jumped 50% In Q2, Microsoft Gains

Amazon.com Inc. (AMZN) may still be the leader in the cloud computing market, but with business booming, Microsoft Corp. (MSFT) is gaining share.

That’s according to market research firm Synergy Research Group, which reported cloud infrastructure services revenue increased 50% in the second quarter compared to the year ago period. The same growth rate  was seen in the first quarter of 2018 and is higher than the 2017 growth. Synergy said full year growth was 44% last year.  

Cloud Business Booming For The Top Four

During the three months ended in June, Amazon Web Services rivals Microsoft, Alphabet Inc.’s Google (GOOG ) and China-based Alibaba (BABA) “far surpassed overall market growth rate” with Amazon keeping the top spot. According to Synergy Research, Amazon’s market share edged up one percentage point to 34%. As these four cloud providers increase their grip on the market, smaller players are seeing their market share decline, according to Synergy. Of the top 25 cloud providers, only three other companies have seen their market share increase by a good amount although none have achieved a market share of 1% or more, according to the report. Synergy Research estimated that quarterly cloud infrastructure service revenue stands at more than $16 billion. (See more: Google, Microsoft Go After the Oil Market: WSJ.)

“Amazon Web Services and its three main challengers all turned in some exceptional growth numbers in the quarter,” John Dinsdale, chief analyst at Synergy Research Group, said in a report highlighting the quarterly results. “Collectively those four firms alone accounted for well over three-quarters of the sequential growth in cloud service revenues.”  He noted that the four big players are “throwing the gauntlet down” to the smaller rivals by investing heavily in data center infrastructure and operations. “Their increased market share is clear evidence that their strategies are working,” he said. (See more: Microsoft Could Make a Big Cloud Buy: BMO.)

Microsoft Has Been Stepping Up Its Cloud Game

Microsoft has been chipping away at Amazon’s dominance in the cloud computing market for some time. For its fiscal fourth quarter, which Microsoft reported earlier this month, its Azure cloud product recorded revenue growth of 89%. In an effort to notch up its challenge to Amazon Web Services, Walmart Inc. (WMT) announced earlier in July that it inked a five-year deal with Microsoft to use its Azure and 365 cloud services. In an interview with the Wall Street Journal, Microsoft CEO Satya Nadella said at the time that the two companies have a shared rivalry with Amazon and that it “is absolutely core to this.” He added: “How do we get more leverage as two organizations that have depth and breadth and investment to be able to outrun our respective competition.”