Microsoft's cloud vision led to a 2020-revenue performance that outpaced both Google Cloud and AWS

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With the numbers tabulated from the cloud revenue wars involving industry leaders Amazon Webs Services (AWS), Microsoft Azure, and Google Cloud, it seems that Microsoft's 2020 report stands head and shoulders above the rest.

While Amazon's AWS cloud revenue was particularly impressive to investors at $45.4 billion for the quarter and Google made gains to bump Salesforce into the fourth spot, Microsoft still managed to edge out its competition by posting $59.5 billion a few weeks earlier during its earnings call. With a 30%+ higher ceiling regarding revenue, Microsoft's numbers make it clear that in 2020 the company's cloud services adoption outpaced that of Google's and Amazon, and industry analysts Bob Evans offers a clear understanding as to why.

Inexplicable confusion
As I’ve mentioned before, it is inexplicable to me why so many analysts and people in the media still refer to AWS as the runaway leader or dominant player in the cloud. As the numbers clearly reveal, Microsoft’s cloud business is almost one-third larger than Amazon’s.

I suspect that many still inaccurately equate or conflate “cloud” with “IaaS,” which is a perspective at least a full decade out of date. Without question, Amazon created and still leads the IaaS segment of the cloud—but the cloud of today looks nothing at all like it did 10 years ago when “cloud = IaaS” was a reasonable equation.

Amazon's mindshare in the market definitely presents a marketing hill Microsoft is looking to overcome, but the company's slow and arguably less flashy pace appears to be working in its favor. Evans highlights Microsoft's incremental revenue advances mirror our own earnings reports, showing the company's continued growth in the shadow of Amazon's AWS dominant narrative.

  • Q1: AWS $10.22 billion, Microsoft $13.3 billion
  • Q2: AWS $10.81 billion, Microsoft $14.3 billion
  • Q3: AWS $11.6 billion, Microsoft $15.2 billion
  • Q4: AWS $12.74 billion, Microsoft $16.7 billion
  • Full-year: AWS $45.4 billion, Microsoft $59.5 billion

As previously stated, Amazon has in fact run away with a much larger IaaS segment of the market and it will take some time and maneuvering for Microsoft to make inroads, but its pivot to platform and development accessibility is paying out dividends in the interim and it seems the pandemic has only exacerbated the issue. Rather than simply offering a flexible infrastructure set and services in AWS, Microsoft is providing an almost templated experience combined with a much larger development and deployment platform that can help businesses transition to cloud computing a bit faster and with fewer hands-on. Within those difference margins, is where Microsoft sees continued success and has noted its intentions previously during earnings calls.

Both Microsoft CEO Satya Nadella and CFO Amy Hood have stressed the idea that Microsoft's Azure services are intended to meet customers' anticipation of what a transition to the cloud should be like.

"Thinking about it holistically is why it’s so important for us and why we keep coming back to the commercial cloud as our frame. It’s how customers see the solution. It’s how we sell, and it is how solutions are actually implemented for business-process change."

Furthermore, Nadella hones in on why Microsoft's adoption has been a steady stellar success for the company and how its evolution will continue to serve its business demand.

Digital capability is key to both resilience and growth. It’s no longer enough to just adopt technology: businesses need to build their own technology to compete and grow... We are empowering domain experts, enabling anyone in an organization to build applications, automate processes, create virtual agents, and analyze data."

As a software company with a proven track record of creating platforms and expansive development tools and options with things like Windows and Office, Microsoft has seemingly applied a familiar playbook with Azure. It is not enough to provide a scalable infrastructure, which is among the things AWS excels at, but also providing customization tools for companies to take advantage of seems to be a winning combo for Microsoft as of late.

With Amazon's new CEO Andy Jassy, a prominent cloud advocate and director in more control of the company, it'll be interesting to see how and if Amazon begins to make similar concessions for its cloud services.

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