As AWS Stumbles Versus Microsoft, Google Cloud, and Oracle, Andy Jassy Offers Lame Spin

While CEOs always use earnings calls to portray their companies in the best light, Andy Jassy was unsuccessful in using Amazon’s Q2 call to try to explain away the cold, hard fact that AWS is losing ground in the Cloud Wars to Microsoft, Google Cloud, and Oracle.

During the July 31 call, Jassy was asked not once but twice why AWS’s growth rate is significantly lower than those of the cloud businesses for Microsoft, Google, and Oracle. And while Jassy is clearly a hugely successful and gifted executive, the rationale he offered and the rosy picture he tried to paint can’t change the fundamental reality shown in this graphic that I first posted on Aug. 7 in an analysis headlined “Q2 Cloud Shakeup: AWS Losing Ground to Microsoft, Google, Oracle“:

HYPERSCALER HEAD-TO-HEAD COMPETITION IN Q2

(Source: CloudWars.com)

To back up my contention that Jassy’s attempts to explain away the underperformance of AWS were “lame,” here’s the verbatim question asked by financial analyst Doug Anmuth of JP Morgan followed by excerpts of Jassy’s reply with my take on each of those.

Question from Anmuth: “On AWS, we’re seeing significantly faster cloud growth among the #2 and #3 players in the space. I totally appreciate that AWS is coming off of a bigger base but beyond that, do you think the output gap is due more to customer demand or infrastructure supply or both?”

And here are some of the comments Jassy made in reply to that question, followed by my reaction to each of those comments by Jassy.

1. Relative sizes of the hyperscalers: “On the question on AWS, the first thing I’d say is that as you said, Doug, in your question, the year-over-year percentages and growth rates are always a function of the base in which you operate.”

— My reaction: Yes, Jassy’s 100% right that it’s easier to rack up big growth rates when your revenue base is smaller. But as the chart above shows, not only is AWS growing much more slowly than all the others, but its rate of acceleration from Q1 to Q2 (17% to 17.5%) is much less steep than those for Microsoft (20% to 27%), Google Cloud (28% to 32%), and Oracle (23% to 27%). That means that, relative sizes aside, those other three are grabbing proportionately outsized shares of new business versus what AWS is taking.

2. Who’s got the biggest cloud business? (HINT: it’s not AWS): “And we have a meaningfully larger business in the AWS segment than the others,” said Jassy. “I think the second player is about 65% of the size of AWS.”

— My reaction: Sorry, but that’s a load of nonsense because Jassy wants to have it both ways: he wants to count every single nickel of AWS’s annualized revenue of $123 billion, but he simultaneously wants to include only a relatively small portion of the annualized cloud revenue for “the second player.” While Jassy did not specify Microsoft by name, that is clearly the company to which he’s referring because, as he says, “the second player is about 65% of the size of AWS.” And 65% of AWS’s annualized revenue of $123 billion is about $79 billion, and Microsoft has disclosed that Azure’s annualized run rate is more than $75 billion.

But while Microsoft’s annualized Azure revenue is $75 billion, the annualized run rate for its total cloud business is $187 billion. In Jassy’s comparison, he is very conveniently ignoring the other $112 billion in the Microsoft Cloud business.

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Playing Word Games

Is Jassy trying to restrict the comparison to cloud infrastructure? Perhaps — but if he is, why doesn’t he just say so? My guess is he knows that customers look at cloud as much more than just infrastructure — so he wants to be able to tout the AWS dominance over “the second player” but in order to do so, he has to confine the Microsoft portion to only about 40% of its total cloud revenue.

Sorry, Andy, but the truth is that Microsoft’s cloud business is 50% larger than AWS’s — and on top of that, Microsoft’s is growing much, much faster, particularly using Jassy’s isolation of Microsoft’s cloud business to just the Azure portion: last quarter, Azure grew 39% while AWS grew 17.5%.

3. Who’s growing more rapidly? (HINT: it’s not AWS): “And when we look at the results over the last number of quarters, there are sometimes where — as far as we can tell, we’re growing faster than others and sometimes others are growing faster than us,” said Jassy.

— My reaction: Once again, Jassy’s claims just don’t match up to objective reality: at no point in the last two years has the AWS business grown faster than that of Microsoft — including just the Azure business — or of Google Cloud or of Oracle. At the same time, to give credit where it’s due, Jassy is 100% correct in saying that “sometimes others are growing faster than us” because that has been the case in every single quarter for at least the last two years and probably the last three.

4. Who’s #1? (HINT: it’s Microsoft, not AWS): “But it’s still like if you look at the second-place player you’re talking about, it’s still a pretty significant market-segment leadership position that we have.”

— My reaction: It’s probably true that AWS is still the cloud-infrastructure leader, and perhaps by a large margin. But by counting every cent of AWS’s revenue while comparing it to less than half of Microsoft’s cloud revenue, Jassy’s intentionally muddying up what’s going on in this business — and in the process, he’s undercutting the credibility of both AWS and himself. Further, Jassy does not help his cause by being rather obtuse about this whole comparison he’s trying to make: he does not say “we’re talking just about infrastructure,” but that is the impression he wants to create; he says AWS is way bigger than everybody else, but he doesn’t identify or quantify that claim, other than that the #2 player is only 65% the size of AWS “as far as we can tell.”

5. RPO/backlog comparisons underscore the AWS backslide: Whether the preferred term is RPO or backlog, a look at the future business being won by the four hyperscalers shows conclusively that the pipelines for the other three hyperscalers are growing much more rapidly than AWS’s for the most-recent quarters:

• Microsoft RPO up 37% to $368 billion (those are not typos, I promise);
• Google Cloud backlog up 38% to $106 billion;
• Oracle RPO up 41% to $138 billion, with CEO Safra Catz projecting RPO in fiscal 2026 will grow 100%; and
• AWS backlog up 25% to $195 billion.

Now I’m certainly not sneezing at the AWS figures of backlog up 25% growth to $195 billion. But relative to the RPO/backlog figures posted by the other three hyperscalers, AWS is falling farther and farther behind in terms of winning future business.

Plus, the astronomical RPO numbers from Microsoft demolish Jassy’s contention about higher growth rates being purely a function of smaller revenue bases because Microsoft’s cloud business is 50% bigger than AWS.

Final Thoughts

While I recognize and respect the need for Jassy to show AWS in the best light, I don’t believe he does AWS any favors with this sleight-of-hand description of what’s going on in the market. And some of the collateral damage accruing to AWS will be the reinforcement of the perception among customers that AWS is exclusively infrastructure — to borrow a term from yesteryear, IaaS — and that customers wanting more of the cool software stuff around apps and databases and agents and analytics should look elsewhere.

Given his peculiar segmentation of Microsoft’s cloud revenue, Jassy seems to be obsessed with peddling IaaS while customers are maniacally focused on not just infrastructure but all the other good stuff the entire cloud enables: revenue growth and accelerated product development and leveraging AI and nurturing great talent and moving at the speed of their customers.

Seems to me that Andy Jassy has a choice to make: He can drop the ruse about ‘We’re much bigger than everybody else as far as we know and we’re growing faster than everybody else as far as we know’ and look to reframe the AWS value proposition to customers, OR he can watch Microsoft and Google Cloud and Oracle continue to grow much more rapidly than AWS and take more share from AWS.

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