Market Share of Azure vs Amazon, Which Wins?

Cloud services have become a must-have feature for most businesses in driving efficiencies and reducing costs. Among the two largest providers are Amazon.com, Inc.’s (NASDAQ:AMZN) and Microsoft Corporation’s (NASDAQ:MSFT) Azure but which has the larger market share and which is the better bet if you want to invest in one?

AWS Is The Cloud Computing Pioneer 

In 2006, Amazon launched AWS and quickly became the leader in cloud services. AWS has developed significantly since then and now offers a variety of services to meet the needs of businesses.

Its key services include EC2 for expanded computing power, S3 for object storage scaling, RDS for managed relational databases, Lambda for serverless code execution, and CloudFront for rapid content delivery via a distributed network.

Azure, on the other hand, dates back to 2010 and is Microsoft’s direct competitor to AWS, now almost synonymous with cloud services for enterprises.

Azure’s primary appeal is that it interacts with other Microsoft products and services, which in turn are used by so many businesses globally.

Azure’s Virtual Machines provide flexible computing power and also manage database solutions via Azure SQL Database. Using Azure’s Active Directory it’s also possible to secure access management.

Azure Kubernetes Service (AKS) makes it easier to deploy things with Kubernetes, and Azure IoT Hub helps connect and look after IoT devices. These services highlight how far-reaching and flexible Microsoft’s cloud offering is. Indeed, it integrates smoothly with current Microsoft systems, making it an easy shift to cloud services for many companies, particularly those that have investments in Microsoft products already.

What Is The Market Share of Amazon vs Azure?

AWS is the largest cloud computing provider, holding a 31% share of market versus Microsoft Azure with 24%.

In the fourth quarter of 2023, businesses globally spent $12 billion on cloud infrastructure services versus in the same period of 2022, amounting to $73.7 billion by year end.

For the full year of 2023, businesses forked over $270 billion for cloud infrastructure, demonstrating just how competitive this market really is.

Although it is already large, the cloud industry continues to expand rapidly. During 2023, expenditures increased by 19%, and in the fourth quarter alone growth of 20% versus the prior year was reported. Spending increased by $5.6 billion from Q3 to Q4, the largest increase on record.

AWS, which is the profitable cloud section of the big internet company, remains the market leader in cloud systems. Even though its share of the market fell to 31% in the fourth quarter of 2023 from 33% in 2022, it still maintains the leading position.

Meanwhile, Microsoft, the main competitor, gradually has been closing the market share gap and reached its highest market share ever at 24% during that time.

Azure and AWS Both Highly Profitable

In Q4 2023, AWS continued to report impressive growth with segment sales coming in at $24.2 billion, a rise of 13% compared to the prior year. As more businesses relied on Amazon for workloads, AWS made an extra $1.1 billion in revenue from one quarter to the next.

Operating income for the segment also showed strong results, amounting to $7.2 billion in contrast with $5.2 billion in the last quarter of 2022.

Over the full year of 2023, sales from the AWS segment rose by 13% compared to last year, reaching up to $90.8 billion and supporting operating income of $24.6 billion, a significant rise from prior years.

Similarly, Microsoft’s fiscal Q2 2024 was remarkable for its cloud business, which reported more than $33 billion in sales, a huge annualized increase of 24%. As Microsoft leads the tech titans in artificial intelligence, so too is Azure benefitting from the compute needs.

Azure’s artificial intelligence features have gained a large number of users, with more than 53,000 customers using Azure AI. Interestingly, over one-third of these customers started using Azure last year, highlighting how Microsoft is successfully using AI to complement its cloud services.

Targeting New Sectors Has Proven Lucrative

Cloud services aren’t just relied upon by businesses generally but governments too. The introduction of AWS European Sovereign Cloud is very important, particularly for governments and sectors in Europe with extremely strict rules.

By providing a separate cloud system that fits tough legal requirements, Amazon has an opportunity to position itself more attractively to an important part of the market.

In addition, the AWS Canada West Region initiative has strengthened the firm’s position as the top cloud service company. This move to become the first big cloud provider to set up in Western Canada shows how dedicated Amazon is to offering wide-reaching and dependable services to customers all over the globe.

On the commercial side, Amazon’s partnership with Amgen Inc. (NASDAQ:AMGN) to use generative artificial intelligence for the discovery, development, and faster production of drugs shows how transformative AWS’s advanced features can be.

The cooperation not only spotlights the innovative opportunities for Amazon SageMaker but also emphasizes AWS’s push into new sectors. Similar collaborations are expected to strengthen Amazon’s status as a top worldwide player in cloud computing.

Azure Growth Impact

Microsoft Azure OpenAI Service, which offers support for advanced models like GPT-4 Turbo, GPT-4 with Vision, and Dall-E 3, is becoming more popular. The last reported quarter saw an increase in use by AI-focused new companies such as Moveworks and Perplexity, SymphonyAI, along with big companies, and half of the Fortune 500 businesses are using it, too.

At the CES event, Walmart demonstrated how it uses Azure OpenAI Service with its own data and models to improve how more than 50,000 workers do their jobs and make shopping better for many customers.

Another example of a big win is with Vodafone, which decided to spend $1.5 billion on cloud and AI services during the coming ten years.

Many big companies in different fields are choosing Azure OpenAI Service and Azure cloud services, which is further cementing Azure as a key force in compute, which Sam Altman predicts will be massively important in the coming decade.

Which Stock to Buy?

Both Amazon and Microsoft are poised for growth, with Amazon leading the way due to its strong performance, particularly in the realm of cloud computing.

Analysts anticipate Amazon’s sales will rise by 11.6% year over year, reaching a total of $641.48 billion. EPS is expected to rise sharply by 44.4% from the previous year to hit $4.19 per share.

Revenue is forecast to rise at Microsoft too, up 15.3% from last year to $244.33 billion. The company is project to see earnings per share reaching $11.70, improving by 19.3% year over year.

Currently, Amazon is a cheaper than Microsoft with a trailing-12-month Price/Sales ratio for Amazon is 2.91x, which is much less compared to Microsoft’s at 13.31 times.

Similarly, Amazon’s trailing-12-month EV/Sales ratio is 3.34x, which is much less than Microsoft’s 13.22x. Yet another data point is Amazon’s trailing-12-month EV/EBITDA, which sits at 22.43x versus Microsoft’s 25.41x.

In terms of analysts views, 45 out of 47 have a Buy rating on Amazon stock now. For Microsoft’s stock, 42 of 47 rate it a Buy.

The consensus forecast for Amazon share price is $209.79 per share, which is 18% higher than present levels whereas Microsoft is forecast to hit $471.24 per share, a 17.57% rise from the current share price.

To sum up, Amazon and Microsoft both have a good chance of growing but AWS is growing more rapidly and commands the stronger market share position. Also, the multiples associated with Amazon’s appear more reasonable and so make it a more compelling investment opportunity at this time, though neither stock is likely to disappoint long-term.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.