Which cloud computing stock is predicted to surpass its rival between Microsoft and Amazon by 2025?
In the bustling world of tech giants, both Amazon and Microsoft have shown remarkable growth in their cloud-computing divisions in 2024. While Microsoft's Azure saw the higher revenue growth, it was Amazon's stock that outperformed. Let's explore which titan might claim the top spot this year.
Cloud-Computing's Giant Leap
The explosion of artificial intelligence (AI) has propelled cloud computing to new heights, as companies leverage services from these tech giants to build their own AI models and applications.
Amazon was a trailblazer in this space, launching Amazon Web Services (AWS) back in 2006 to expedite its infrastructure development for partners and affiliates. Today, AWS, with its infrastructure-as-a-service, is Amazon's most profitable segment, surpassing its retail operations. In the last 12 months, AWS generated an impressive $36.4 billion in operating income, while Amazon's North American and international operations yielded $24.3 billion.
Occupying around 31% of the cloud market, Amazon leads the sector, comfortably ahead of Microsoft Azure, which holds a 20% share. The cloud sector's segment witnessed a 19% revenue surge in Q4 2024, while its operating income skyrocketed by 49%. The growth was primarily fueled by AI-related revenue that soared by triple digits.
Amazon's AI prowess is evidenced through its services like Bedrock and SageMaker, which offer pre-built AI models to customers for AI application development. AWS also manufactures custom AI chips – Graviton and Trainium – specifically designed to optimize training large language models and AI inference. Some notable customers leveraging these chips are Apple, Anthropic, and SAP.
Microsoft's Azure, meanwhile, has been one of the fastest-growing sectors of the tech giant's business. In Q3 2025, Azure revenues spiked by 33%, with Microsoft's assistance in helping customers create their AI agents and copilots. Azure's OpenAI usage nearly doubled as developers migrated applications from testing to production. The service is also boosting the usage of Azure Cosmos DB and Azure SQL DB, Microsoft's data analytics services.
Microsoft's Azure expansion is, however, hindered by a scarcity of capacity. To meet the demand for AI infrastructure, Microsoft is investing heavily in new facilities and technologies. In Q2 2025, Azure revenue is projected to increase by 31% to 32% in constant currency, with an even more robust growth expected in the second half of the fiscal year as its capital expenditures come online.
Beyond Clouds
Amazon and Microsoft are not just cloud titans, but highly influential companies in their own right. Amazon is the global leader in e-commerce and logistics, with its Prime Video streaming service rapidly gaining popularity.
Amazon's retail business is in excellent shape, with North American sales booming by 9% and international sales jumping by 12% in the last quarter. The company is employing AI and robotics to streamline its warehouse and logistics, thereby reducing costs and improving efficiencies.
Amazon's higher-margin sponsored ad business is also flourishing, resulting in substantial operating income growth, with the North American segment witnessing a 33% jump in operating income to $5.7 billion and the international segment recording an operating income of $1.3 billion compared to a tiny loss the previous year.
Microsoft, on the other hand, holds a commanding position in the workplace productivity toolspace, with its Microsoft Office 365 suite of tools ranging from Word to Excel and Powerpoint. Its Windows personal computing operating system is another significant revenue source. Microsoft also owns the LinkedIn and gaming platform, Xbox, in addition to GitHub and other businesses.
Microsoft's Copilot 365 AI bots offer ample growth potential, with the AI agents continuously evolving to accommodate natural language prompts and advanced functionalities, such as using Python in Excel. The intervention of Copilot 365 comes at an attractive price – $30 per enterprise user per month, along with a 365 subscription, making it an exciting revenue range for Microsoft.
Valuation and Final Take
Both Amazon and Microsoft are on solid growth paths as they stride into 2025, with the potential to deliver long-term returns. However, Microsoft appears more competitively priced, with a $32.5 forward price-to-earnings ratio in comparison to Amazon's $36 forward P/E ratio in 2025. In addition, Microsoft's revenue growth is slightly ahead of Amazon, making it an attractive choice.
In conclusion, while both stocks have their merits, Microsoft's totality of cheaper valuation, faster revenue growth, and substantial growth opportunities in AI copilots make it the slightly more appealing choice for the coming year.
- In the realm of financial investments, analysts are discussing the potential of both Amazon and Microsoft's cloud services, with a focus on their AI-driven revenue streams, particularly in the year 2024.
- To further enhance cloud-computing efficiencies, Microsoft is investing heavily in expanding its capacity, building new facilities and implementing advanced technologies, promising a projected revenue increase of 31% to 32% in Q2 2025.
- In light of the growing demand for AI infrastructure, Microsoft is employing cloud-based services like Azure Cosmos DB and Azure SQL DB, which have seen an increase in usage as developers transfer applications from testing to production.
- As we look towards the future, the Aussiedlerbote platform is providing valuable insights for investors, displaying projected earnings for both tech giants in 2024, helping investors make informed decisions to maximize their returns.
