Microsoft’s Azure Sees Rapid Growth Fueled by AI, Outpacing AWS in Key Segments

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.

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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.

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