While Amazon Web Services (AWS) remains by far the world's biggest public cloud platform in terms of revenue and customers, the drumbeat of recent articles and reports suggesting that its biggest rival's momentum is inflecting has been hard to ignore.
Last weekend, The Wall Street Journal ran a story that observed how Amazon.com (AMZN) is now putting more effort into selling businesses on using its cloud platform rather than Microsoft's (MSFT) Azure, after years of hardly ever mentioning Azure (or other competitors) in its public comments or marketing materials. AWS CEO Andy Jassy and CTO Werner Vogels both took public shots at Azure last year, and AWS also ran ads that took aim at its top rival.
A couple days later, Goldman Sachs published its latest bi-annual survey on the spending plans of senior IT execs at Global 2000 companies. The survey strongly indicated Azure is gaining enterprise mindshare relative to AWS.
56 of the 100 execs Goldman surveyed said that their firm is using Azure's cloud infrastructure (IaaS) services, and 66 said that they expect to three years from now. This compares with 48 saying that they use AWS, and 64 saying that they'll do so in three years. For Alphabet's (GOOGL) Google Cloud Platform (GCP), the numbers were 18 and 30, respectively.
It's worth noting here that the survey results don't necessarily mean that the respondents are collectively spending more on Azure than on AWS. In July, research firm Gartner estimated that AWS claimed a 47.8% IaaS revenue share -- down slightly from 2017's 49.4% but still dwarfing Azure's 15.5% share (up from 2017's 12.7%). But the survey results do act as another sign that Azure continues gaining ground.
In the smaller but still sizable market for cloud app platform (PaaS) services, Azure claimed a much bigger lead in Goldman's survey. 41 respondents said that they're using Azure's PaaS services, and 55 said that they would in 3 years. This compares with 10 and 32 for AWS, and 22 and 34 for Salesforce.com (CRM) , which runs the Heroku and Lightning (formerly Force.com) PaaS platforms.
Three days after Goldman shared its survey results, Mizuho Securities shared upbeat comments about Azure's public-sector opportunities in the wake of its 10-year JEDI contract (currently being protested by AWS) to provide cloud services to the Defense Department. The firm noted that in a talk with Mizuho, the head of channel sales at a major IT systems integrator declared the JEDI deal to be "a game-changer" for Azure, and argued that its official $10 billion value "grossly underestimates the true economic opportunity, both in terms of the amount likely to be spent by the U.S. government on this contract, and broader adoption by other government agencies and enterprise customers in regulated markets for which the JEDI reference model can become a template."
Also of note: On Tuesday, Chetan Puttangunta, a partner at prominent VC firm Benchmark, declared that 70% of the enterprise software startups he's met over the last six months are relying on Azure or GCP rather than AWS, which has historically claimed a massive chunk of startup cloud usage. Puttagunta added that this shift in cloud usage could be the result of Microsoft and Google's greater willingness to partner with software startups than AWS, whose history of using open-source software innovations to launch offerings that compete against open-source startups has sparked a backlash among some developers.
While digesting all of this commentary, it's worth keeping in mind that both Azure and AWS are still seeing strong growth by any objective standard. For its September quarter, Microsoft reported its Azure revenue rose 59% annually -- as usual, the company didn't share a revenue figure -- and also noted that Azure deal activity contributed strongly to a 30% increase in its total commercial bookings. Amazon reported its AWS revenue rose 35% to $9 billion, and also disclosed that the total value of multi-year AWS customer commitments for which it hasn't yet recognized revenue grew 54% to $27.4 billion.
It's also worth keeping in mind that public cloud adoption still has a ways to go, and that AWS, Azure and GCP will all benefit as penetration rates keep rising. Goldman's survey indicated that just 23% of enterprise workloads are currently run in public clouds, and (though it's possible that this number will prove a little too optimistic) that CIOs expect 43% of workloads to be on public clouds in three years.
In addition, though Microsoft has done a lot to improve Azure's competitive standing over the last few years, AWS is still unmatched among public cloud players in terms of its feature set and software and IT services ecosystem. And as the numerous service announcements made in November at its annual AWS re:Invent conference drive home, AWS is intent on holding onto its lead.
But Microsoft does have some important strengths of its own. Among them: Unmatched hybrid cloud capabilities, arguably best-in-class services for managing and analyzing data from IoT devices and assets and tremendous enterprise sales and channel reach. Moreover, though Netflix (NFLX) and many other Amazon rivals have been comfortable using AWS, AWS is often becoming a preferred cloud partner for firms competing against Amazon, whether they happen to be software startups of retailers such as Walmart (WMT) and Gap (GPS) .
None of this means Azure's revenue will catch up to AWS' anytime soon. But it is fair to say that perceptions of this fight have been changing as of late.