In the fourth quarter of last year, Amazon's AWS captured a 62% share of the commercial cloud service market, marking a slight decline from 68% in the same period in 2016. Meanwhile, Microsoft continued to see strong growth, with its Azure cloud services increasing from 16% to 20% during the same timeframe. This shift has led analysts to suggest that Microsoft’s rising momentum could slow down Amazon’s revenue growth in the cloud sector.
According to a recent report by KeyBanc Capital Markets, published on January 13, Amazon's market share in commercial cloud services dropped in Q4 2017, while Microsoft maintained its upward trajectory. The report highlighted that Azure's performance was particularly impressive, as it gained significant ground against both Amazon and Google. Google's cloud market share also increased slightly, moving from 10% to 12% in the same period.
The data shows that Microsoft's cloud division generated approximately $3.7 billion in revenue for the company in 2017, contributing significantly to its total annual revenue of around $96.6 billion. This growth indicates that Microsoft’s cloud business has nearly doubled in size, reflecting consistent progress in recent quarters.
Despite this, Amazon reported that AWS revenue grew by 42% in the third quarter of 2017. However, analysts believe that the rapid expansion of Microsoft’s cloud offerings may eventually challenge Amazon’s dominance. In their analysis, KeyBanc noted that Microsoft offers more pre-built AI models than both Google and Amazon, which are accessible through its global data centers.
As a result of Azure’s growing market share and Microsoft’s advancements in artificial intelligence, KeyBanc raised its 12-month price target for Microsoft stock from $94 to $106. On Friday, Microsoft’s shares closed at $89.60, indicating potential for further gains.
Analysts also mentioned that after speaking with Microsoft executives, they believe most of the company’s revenue will come from infrastructure services rather than AI-specific monetization. They noted that Microsoft will need to continue investing heavily in model training to sustain its growth in the coming years.
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