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Microsoft’s cloud business had a huge quarter, but it’s still way behind Amazon

AP Photo/Eric Risberg
Let’s all buy more cloud computing.
  • Michael J. Coren
By Michael J. Coren

Climate and emerging industries editor

Published Last updated This article is more than 2 years old.

Microsoft’s cloud computing business is on a tear. The company reported its Azure cloud services division grew 108% from a year earlier in its most recently completed quarter. Microsoft’s “commercial cloud,” which includes computing infrastructure as well as product lines like Office 360, brought in $12.1 billion this past quarter, accounting for more than half of the company’s total revenue, according to quarterly results released on Tuesday.

Big companies are shifting billions of dollars from their own computing infrastructure to budgets for buying it as a service from companies like Microsoft, Amazon, and IBM. “Every conversation we’re having with customers is cloud-led,” said Microsoft’s CFO Amy Hood on Tuesday.

Gartner estimated earlier this year that the global market for cloud system infrastructure services like Microsoft Azure and Amazon Web Services (AWS) will reach $22.4 billion in 2016, by far the fastest growing segment of the cloud market.

Microsoft arrived late to the game and is still playing catchup against a formidable rival. Amazon transformed its own internal web resources into AWS in 2006, and it’s already become a nearly $9 billion a year business. The company expects it to grow as big as its retail business one day. Microsoft only launched Azure in 2010 and doesn’t even break out its revenue yet. (Barron’s estimated its first quarter revenue at $560 million, compared to $2.5 billion for AWS during the same period.)

All may not be lost, however. A recent survey of CIOs by Morgan Stanley found that more respondents expect to use Azure (31%) than AWS (30%) by 2019. Already Azure’s growth comfortably outpaced AWS’ last quarter (up 64% from the same period last year). Still, that overlooks just how big AWS has already gotten.

As more enterprises decide to ship off their infrastructure to the cloud, Microsoft wants to be their provider. So far, AWS’ lead shows no real signs of narrowing.

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