Why Microsoft Will Have to Race to Catch Up to Amazon in Cloud Sales

Despite beating Amazon.com Inc. (AMZN) for a new 10-year, $10 billion Pentagon cloud contract, Microsoft Corp. (MSFT) will have to race to catch up to its larger rivals. Amazon Web Services (AWS) leads in the still booming cloud computing market, with a market share triple that of Microsoft’s Azure platform. Now, however, Azure’s Chief Technology Officer is confident that Microsoft will overtake the e-commerce giant in the cloud war, as outlined by Barron’s

Cloud Market Dynamics

While Microsoft's cloud sales grew 59% in the latest quarter, versus a 35% rate for Amazon Web Services over the same period, Amazon remains No. 1 in public cloud computing services with a whopping 47.8% market share last year, followed by Microsoft at 15.5%, and Alibaba Group Holding (BABA) at 7.7%. Alphabet Inc.’s (GOOGL) Google and IBM (IBM) trail behind in fourth and fifth place, with a respective 4% and 1.8% share of the global cloud market.

Following Microsoft’s win of the Defense Department’s contract, analysts are now more optimistic that the old guard tech company can land other bigger deals with enterprises and the government. 

CTO Mark Russinovich spoke to Barron’s about Microsoft’s competitive positioning in the cloud market, a space where business can still thrive even if a downturn does hit the market. This strength can be attributed to a massive shift away from on-premise data centers to the cloud, which offers more competitive pricing, better reliability, and an easier path to scale up.

What’s Next? 

Russinovich says Azure stands out from its rivals due to its hybrid cloud offering. “If we’re talking to enterprise customers, I would say it’s our understanding and relationship with the enterprise, as evidenced by the understanding that they’re going to be hybrid. So building services that meet the requirements for migrating workloads into the cloud,” he said. 

Azure’s growth has propelled Microsoft’s stock to jump 42% in 2019, versus a 21% return for the S&P 500 in 2019.

Take the Next Step to Invest
The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.