Microsoft's Azure cloud services are rapidly gaining ground on Amazon Web Services (AWS), with Azure now estimated to be three-quarters the size of AWS. Bolstering this momentum is a significant focus on artificial intelligence (AI), contributing to a 30% increase in Azure's revenue in the latest quarter. During Microsoft's earnings call, Finance Chief Amy Hood revealed that AI accounted for 6 points of revenue growth in the Azure division, doubling from the previous quarter. Microsoft's strategic integration of graphics processing units (GPUs) for AI applications, including the powerful GPT-4 language model, has attracted 53,000 Azure AI customers, solidifying its position as a leader in the AI market.
In contrast, AWS, while still a major player, reported a slower 13% year-over-year growth in the same quarter. Microsoft's Azure continues to outpace AWS, making up 29% of the company's total revenue and contributing significantly to its operating income. With a widening gross margin from 42% in 2016 to 72% in the latest quarter, Azure's profitability and efficiency gains have become notable. Analysts predict a further acceleration in Azure's revenue growth in the upcoming fiscal year, fueled by new cloud deployments and initiatives in generative AI.
