Microsoft Azure Falls Behind AWS in Revenue Generation
In a surprising turn of events, court documents have emerged revealing that Microsoft’s Azure business generated $34 billion in revenue in the 12 months leading up to June 2022. This figure is less than half of the revenue generated by its key rival, Amazon Web Services (AWS), which amounted to a staggering $72 billion over the same period.
Microsoft has traditionally been secretive about the exact scale of its cloud business, leaving investors and analysts to speculate on its performance. However, these newly disclosed court documents may prompt the company to adopt a more transparent approach when it comes to reporting its revenue.
Historically, Microsoft has combined Azure figures with those of its Enterprise Services, Windows Server, and SQL Server, under a business division it refers to as Intelligent Cloud. This bundled reporting method has prevented a clear understanding of Azure’s individual profitability.
The recently uncovered court filing, which is connected to another antitrust case in the US, raises doubts about the profitability of Microsoft’s Azure business. The cloud market giant’s alleged anticompetitive practices have also brought it under scrutiny in the European Union.
While Microsoft has made significant advancements in generative AI over the past year, including hosting the OpenAI Service and various other artificial intelligence operations on Azure, it remains undetermined whether these developments have resulted in a spike in revenue or an increase in costs.
However, the revelation of Azure’s comparatively lower revenue has raised concerns, especially considering that both AWS and Azure accounted for 30-40% of the UK public cloud market in 2021, according to Ofcom. Synergy, a market research firm, reports that AWS holds a leading 32% share of the cloud infrastructure services market, with Azure following closely with 23%.
Microsoft now faces the challenge of regaining investor confidence in Azure’s profitability, while also addressing antitrust concerns. The extent to which the company will adjust its reporting practices and provide greater insight into its cloud revenue remains to be seen.
Despite the competitive landscape, both AWS and Azure continue to dominate the cloud market, serving a wide range of customers worldwide. As the cloud computing sector experiences rapid growth, it is crucial for Microsoft to reclaim its position as a strong contender in generating cloud revenue.
