A common theme that ran through the quarterly results of the companies: the strength in cloud businesses. This isn’t surprising, given the lockdowns necessitated by the coronavirus (COVID-19) pandemic that led to remote working and studying, heightening the demand for cloud services.
Here’s a look at how Microsoft and Amazon’s cloud businesses fared in the March quarter.
AWS A Foundation Of Amazon’s Growth
Amazon’s cloud business, Amazon Web Services, generated net sales of $10.22 billion in the first quarter, accounting for about 13.5% of the consolidated net sales. AWS’ share of the total operating income of $3.99 billion was about $3.08 billion or 77%.
The year-over-year sales growth of the AWS business slowed from 41% to 33% year-over-year.
In the fourth quarter of 2019, AWS net sales rose by a slightly better 34%.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content=""Amazon continues to see healthy adoption in AWS, though performance post the onset of COVID-19 varied by industry," Stifel analyst Scott Devitt said in a note.” data-reactid=”26″>”Amazon continues to see healthy adoption in AWS, though performance post the onset of COVID-19 varied by industry,” Stifel analyst Scott Devitt said in a note.
The margin of the AWS business improved from 26.1% in the fourth quarter of 2019 to 30.1%.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content=""Positively, we expect strong momentum in cloud as businesses attempt to digitalize operations due to recent world events. The key risk is SMB/start-up customers churning in a recession," Oppenheimer analyst Jason Helfstein said of the AWS business.” data-reactid=”28″>”Positively, we expect strong momentum in cloud as businesses attempt to digitalize operations due to recent world events. The key risk is SMB/start-up customers churning in a recession,” Oppenheimer analyst Jason Helfstein said of the AWS business.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="See Also: 3 ETFs To Buy For Amazon’s Earnings” data-reactid=”29″>See Also: 3 ETFs To Buy For Amazon’s Earnings
Azure Powers Microsoft’s Strong Cloud Performance
Microsoft’s Intelligent Cloud business segment fetched revenue of $12.28 billion for the quarter and operating income of $4.56 billion. This represents roughly 35% of Microsoft’s total revenue and operating income.
Mizuho Securities had modeled in revenues of $11.8 billion from the segment.
The Intelligent Cloud segment consists of the company’s public, private and hybrid server products and cloud services powering modern business and developers.
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The segment’s revenues grew about 27.3% year-over-year.
Microsoft noted that server products and cloud services revenues climbed 30%, driven by a 59% increase in Azure revenues, and enterprise services revenues rose 6%.
Azure is the company’s public cloud for running business apps, and is therefore comparable to AWS on an apples-to-apples basis. Essentially, it is Azure’s 59% growth pitched against AWS’ 33%.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content=""We continue to believe Azure will become increasingly more powerful. We also now estimate that Azure is ~19% of total revenue, up from 11% a year ago," Mizuho analyst Gregg Moskowitz said.” data-reactid=”38″>”We continue to believe Azure will become increasingly more powerful. We also now estimate that Azure is ~19% of total revenue, up from 11% a year ago,” Mizuho analyst Gregg Moskowitz said.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Leading companies from BlackRock to Coca-Cola to Genesys use Azure, Microsoft CEO Satya Nadella said on the quarterly earnings call. ” data-reactid=”39″>Leading companies from BlackRock to Coca-Cola to Genesys use Azure, Microsoft CEO Satya Nadella said on the quarterly earnings call.
“The NBA is using Azure and our AI capabilities to build their own direct-to-consumer experiences, and the world’s largest companies like AB InBev and Mars continue to migrate their SAP workloads to our cloud.”
Amazon Leads, Microsoft Closes In
The worldwide cloud infrastructure services market scaled a record in the first quarter, with spending rising 34% to $31 billion, according to Canalys. Although Amazon’s AWS was the leader with a 32% share in the first quarter, that’s a decrease from 33% one year ago.
Microsoft’s Azure had a 17% share in the first quarter compared to 15% one year ago.
Apart from the market share gain, Azure stood out due to its 59% year-over-year growth compared to AWS’ 32%.
The pandemic has impacted businesses in more ways than one can imagine. It remains to be seen if Microsoft can capitalize on its cloud momentum and close in on its bigger rival.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Photo courtesy of Amazon.” data-reactid=”61″>Photo courtesy of Amazon.
Latest Ratings for MSFT
Date | Firm | Action | From | To |
---|---|---|---|---|
Apr 2020 | Wells Fargo | Maintains | Overweight | |
Apr 2020 | BMO Capital | Maintains | Outperform | |
Apr 2020 | UBS | Maintains | Buy |
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