Table of Contents
AWS – Amazon Web Service, How Microsoft’s AI Based Service Is Hampering Amazon’s Business
Amazon Web Service is still the cloud leader but soon Microsoft cover the gap. Azure cloud is Microsoft’s web service cloud but they are not disclosing the revenue which they are generating from Azure cloud infrastructure, analyst figures suggest that five years ago it was half as big as AWS. Now, it’s about three-quarters the size of its top rival, analysts estimate.
Part of Microsoft’s recent momentum is because of artificial intelligence.
Amy Hood, the company’s finance chief said that Microsoft’s January earning of Azure cloud services division majorly came from AI.
In total, revenue at Azure increased 30% in the quarter, compared with 13% year-over-year growth at AWS.
Microsoft is adding GPU’s (Graphics Processing Unit) to its data center so that clients can run AI models in Azure. That includes GPT-4, a large language model that enables text conversations with OpenAI’s ChatGPT chatbot.
CEO Satya Nadella told, “We now have 53,000 Azure AI customers”
Jamin Ball, partner at investment firm Altimeter Capital, said it seems that some companies are considering Azure specifically because of the excitement surrounding AI and Microsoft’s perceived lead in the market due to its close relationship with OpenAI
AWS took months to come out with a model hat could go up against GPT-4. The company is now offering a number of models in addition to its own, including one from Anthropic, which Amazon backed. On the company’s fourth-quarter earnings call.
Amazon CEO Andy Jassy said that AWS offers “the most expansive collection of compute instances with Nvidia Chips” and the customers are Airbnb and Snap.
An AWS spokesperson referred CNBC to Jassy’s comments from the earnings call, including that the company added more incremental revenue in the quarter than “any other cloud provider as far as we can tell.”
Jassy also said that generative AI is expected to “ultimately drive tens of billions of dollars of revenue for Amazon over the next several years.”
Azure is growing much faster.
Microsoft is earning 29% of its revenue from Azure Cloud Services. Microsoft just surpassed Apple to become the world’s most valuable public company. generated almost $83 billion in net income in 2023, up from $67 billion the previous year. The Intelligent Cloud segment containing Azure generated 46% of Microsoft’s total operating income, up from about 27% in 2016.
Microsoft offers variety of services to their developers including high-margin databases and monitoring tools.
Gross margin in Microsoft’s cloud group widened from 42% in 2016 to 72% in the most recent quarter. The division includes commercial Office subscriptions, the commercial part of LinkedIn and Dynamics 365 enterprise software as well as Azure. Hood has said efficiency gains can come from improvements in power, cooling, data center design, chips and software.
Yun Kim, an analyst at Loop Capital, said in a note that Azure’s revenue growth could pick up.
“We expect its Azure business to accelerate starting next FY (or C2H) as tailwinds from new workloads from both new cloud deployments and GenAI initiatives ramp meaningfully,” he wrote.”
What Is Microsoft Aiming For?
AI technology is changing the way the world does business. A study by PwC calculated that global GDP will increase by 14% by 2030 as a result of AI adoption, contributing an additional $15.7T to the global economy.
In the next five years, business executives across the globe expect AI to have a positive impact on growth (90%), productivity (86%) and job creation (69%) in their country and industry.
At Microsoft, we believe that enterprises can achieve far more with a comprehensive AI strategy rather than incremental changes through isolated use cases. Our vision for the enterprise is to enable every company to transform by bringing AI to every application, every business process and every employee – and as a result, achieve more than it ever thought
possible.
Also Read:
