Microsoft Could Surpass Amazon in Cloud Computing This Year (AMZN, MSFT) – Investopedia

Amazon (AMZN) may have long been the leader in cloud computing with its Amazon Web Services, but that may change later this year as Microsoft Corp. (MSFT) is finally able to surpass it.

Thats according to Pacific Crest Securities which late Friday said Azure, the cloud computing unit of Microsoft, could have more revenue that its main rival for the first time in 2017. In a research note covered by The Street, analyst Brent Bracelin predicted the rise of Microsoft for the first time in 10 years would transition the company from a cloud laggard to a cloud leader. Bracelin said he came to this conclusion after conducting an analysis of the 60 biggest cloud computing companies. It was revealed that the market is poised for primetime and has lots of growth opportunities. The analyst is predicting spending on cloud initiatives could explode to $239 billion in the span of five years, with the Redmond, Washington software giant benefiting the most from the growth. Bracelin pointed to what he called unmatched product depth and breadth" in software as a service, platform as a service and infrastructure as a service as the main reasons. (See also: Microsoft's Azure Cloud Revenue Estimated at $3B.)

While Microsoft still makes the lions share of its money through software sales, its cloud computing business continues to grow. For the three months ending in March, it said revenue in its Intelligent Cloud business came in at $6.8 billion, up 11% compared to the year ago and up 12% on a constant currency basis. During the third quarter, the company said server products and cloud services revenue increased 15%, driven by Azure cloud revenue growth of 93%. Our results this quarter reflect the trust customers are placing in the Microsoft Cloud, said Satya Nadella, chief executive officer at Microsoft said at the time. From large multi-nationals to small and medium businesses to non-profits all over the world, organizations are using Microsofts cloud platforms to power their digital transformation. (See also: Credit Suisse Bullish on Microsoft Cloud Business)

Pacific Crest isnt writing off Amazon completely in the cloud market, despite predicting the rise of its main rival and even though it has seen revenue growth at AWS decline for seven quarters in a row. Bracelin said that business appears to be increasing during the second quarter, with revenue growth of 9% sequentially forecasted. "We remain bullish on the five year prospects for AWS and are encouraged by 2Q cloud activity picking up," Bracelin wrote. "However, investor optimism is partially reflected in the valuation."

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Microsoft Could Surpass Amazon in Cloud Computing This Year (AMZN, MSFT) - Investopedia