Although an Azure vs AWS comparison based on revenue should never be the foundation of a cloud adoption decision, it can be interesting to analyze trends in Azure vs AWS growth to see where the cloud computing market is headed and to answer the question, "is Azure really catching up?"—a question that seems to attract plenty of attention and heated debate amongst the cloud community.
In this article, we’ll dive into the cloud market landscape, conduct an AWS vs Azure comparison, and provide key considerations when it comes to your decisions in the cloud.
Amazon Web Services market share
In their latest press release, Amazon announced $13.5 billion USD in revenue for Q1 2021, compared to $10.2 billion USD in revenue for Q1 in 2020. Year over year, AWS’ revenue grew by 32%.
The tables below show AWS revenue growth and percentage change year over year from Q1 2016 to Q1 2021. While revenue continues to grow at a steady pace, AWS’ rate of growth shows a trend that it's diminishing over time. We’ll talk more about why this might be the case later.
However, it is important to note that in the latest quarter, AWS' revenue growth rate has actually increased from 28% to 32.35% (year-over-year growth Q4 2020 to Q1 2021). It will be interesting to see if this is a trend that will continue.
Microsoft Azure market share
While Amazon reports AWS revenue in dollars, Microsoft only shows Azure revenue growth by percentage. In addition, Microsoft combines their revenue from Azure Cloud with other services under the heading “Intelligent Cloud” (which includes revenues from SQL Server, Windows Server, Enterprise Services, and others.). The additional revenue from these services makes it difficult to find the revenue specific to Azure. As a result, it’s near impossible to compare like-for-like market share based on revenue with AWS and other cloud vendors.
With that in mind, we can still evaluate Microsoft Azure’s growth rates over time.
From Microsoft's FY21 Q3 Earnings Release (results from the quarter ending March 31, 2021, as compared to the corresponding period of the last fiscal year), Microsoft shared that the Intelligent Cloud category revenue increased 23% to $15.1 billion, "driven by 50% growth in Azure revenue." The lack of specificity in the actual dollar amount of revenue generated by Azure continues to frustrate the cloud community, as it's difficult to see how Azure is really performing.
Nonetheless, it's evident that Microsoft continues to benefit from the success of their cloud services, with the Intelligent Cloud category delivering the highest revenue amount of all segments this quarter—approximately 36.2% of Microsoft's total consolidated revenue (or 37.7% in total operating income).
From this chart, we can also see that, similar to AWS, Azure continues to experience significant overall revenue growth year over year, but at a diminishing rate over time. The last quarter remained stable compared to the previous (50% to 50%), but were both slight increases from the quarter prior in year-over-year growth (from 48% to 50%, FY21 Q1 to FY21 Q2). As we mentioned with AWS, it will be interesting to see if this is a trend that will continue for both the cloud service providers.
Comparing AWS vs Azure
Given the differences in the way AWS and Microsoft report earnings, it’s impossible to compare a like-for-like comparison of AWS vs Azure market share. However, based on the data we do have, we can make a few observations:
- AWS and Azure are both experiencing revenue growth year over year. In a given quarter, AWS and Azure have shown an increase in the amount they earn compared to the same quarter from the previous year.
- AWS and Azure are both experiencing diminishing revenue growth rates year over year, with the exception of the last quarter. Although AWS and Azure have seen an increase in the amount they earn based on the same quarter from the previous year, the difference in that amount is getting smaller on average each quarter. This is with the exception of the last quarter, where AWS' revenue growth rate increased from 28% to 32% and Azure's remained stable at 50%.
- In the past few years, Azure has had higher revenue growth rates when compared directly to AWS. Most recently in FY21 Q3, Azure’s revenue growth was 50% compared to AWS’ revenue growth of 32%.
- Although Azure’s growth rates are higher in the last four years, Azure’s revenue growth rate is diminishing at a faster rate than AWS. AWS’s growth rate between that period decreased by 48%, while Azure’s growth rate decreased by 58% in the same time frame.
Market trends: Why AWS is still the market leader
We can also look at analyses provided by credible third-party research firms. New data from Synergy Research Group shows that “While Amazon and Microsoft continue to account for over half of the worldwide market, Microsoft once again gained ground on its larger rival and hit the milestone of achieving a 20% worldwide market share.
Microsoft, Google, and Alibaba have all steadily gained market share over the last four years, though it has not been at the expense of market leader Amazon. Amazon's market share has stayed in the 32-34% band throughout that four-year period."
Microsoft, Google, and Alibaba have all steadily gained market share over the last four years, though it has not been at the expense of market leader Amazon.
The image below represents the growth rates we discussed and also shows the overall predicted market share.
In the image below, Canalys offers a similar representation of the cloud provider market, with AWS holding steady at 32% and Azure holding 19%.
At the end of the day, we can gather that AWS is still clearly the market leader. While they don’t double the market share of other cloud providers as they had in the past, it’s primarily because other players are entering the game and leveling the playing field, such as Google Cloud Platform, Alibaba, Oracle Cloud Infrastructure, and others. For example, Google Cloud maintained strong momentum this year, seeing a 56% growth in the last quarter. As Canalys states, "Cloud-native development and accelerated cloud migration among its customers has been boosted by its focus on industry-specific solutions, machine learning, analytics, and data management."
In large part, AWS owes its #1 position in the IaaS market to being the first cloud provider to market in 2006. However, Microsoft has a longer history of providing on-premises services to large enterprises and, over the past few years, has been leveraging its strong on-premises presence to convert on-premises Microsoft customers to Azure cloud customers.
Is AWS better than Azure?
So given everything we’ve outlined above, you may be wondering, is one cloud provider better than another? When choosing the right cloud provider for your business, market share shouldn’t be the determining factor. There are several factors to consider, and ultimately, the choice between the two—or the choice to use a combination of cloud service providers—will depend on each organization's unique needs and how the results of an Azure vs AWS comparison align with those needs. If you’re considering a multi-cloud approach, you should consider the advantages and disadvantages of multi-cloud in our article here.
Our recommendation is to compare the differentiated service offerings from each cloud provider in order to make the most of the cost, performance, operations, and security benefits available to you. Our customers are increasingly leveraging multiple cloud service providers to create a custom multi-cloud environment to achieve their unique performance and financial requirements.
We get it—this can be a daunting task. That’s why we created an in-depth comparison of cloud services among the leading cloud providers (yes, we also include Google Cloud!). Download a copy for yourself here: Comparing Services For The Big Three Cloud Providers
Azure vs AWS Comparison: FAQs
Both Amazon and Microsoft's cloud services are becoming increasingly more important in the wake of the COVID-19 pandemic, as organizations worldwide are making large investments in public cloud infrastructure to benefit from the promises of improved agility, faster time to market, and decreased risk. Sid Nag, research vice president at Gartner states that "the pandemic validated cloud's value proposition. The increased use of public cloud services has reinforced cloud adoption to be the 'new normal,' now more than ever."
Any hybrid services billed by AWS and Azure are included in the total revenue figures. However, some hybrid SaaS and PaaS services, such as Exchange Server hybrid services are not included in Azure's breakout of Intelligent Cloud services.
Neither AWS nor Azure reveal the percentage of customers taking advantage of committed use discounts, so it's impossible to determine the impact. However, if every customer maximized discount opportunities, it could have an impact on future revenues.
It has been reported in the past that up to 35% of cloud spend is wasted on unused and underused resources. Therefore, if this overspend could be eliminated by cloud cost optimization, it would certainly have an impact on Azure and AWS revenues.
As mentioned previously, to determine which cloud service provider better meets your business needs, you would need to conduct a comparison of Azure vs AWS features. However, it doesn't have to be an all-or-nothing decision. If you find features or services of both clouds meet your business needs, it can be advantageous to adopt a multi-cloud strategy where you benefit from the best of both worlds.