Attention, Amazon and Google: Here’s the Microsoft Q3 Number You Should Focus On

While it’s striking to see that Microsoft’s Q3 cloud revenue of $11.6 billion exceeded that of both Amazon and Google combined, and that Azure revenue grew 59% while AWS’s grew 35%, the most-stunning of all of Microsoft’s big Q3 numbers reveals the vast scope of its Azure AI business.

CEO Satya Nadella shared these remarkable details during last week’s earnings call:

“The quintessential characteristic of every application going forward will be AI. And we have the most comprehensive portfolio of AI tools, infrastructure and services. Azure AI now has more than 20,000 customers, and more than 85 percent of Fortune 100 companies are using Azure AI in the last 12 months.”

No doubt some of those 20,000 AI customers are simply small trials. But even if, in a worst-case scenario for Microsoft, only half of those 20,000 customers evolve into big-time AI accounts, that translates into 10,000 ambitious customers pushing AI across their organizations.

Can any of the other major AI players—Amazon, Google, IBM—match that total of at least 10,000 and possibly 15,000 active and ambitious AI deployments? With more than 85 of those taking place within the world’s largest corporations?

This massive growth in Azure AI is another excellent proof-point for my long-held belief that it is Microsoft and not Amazon that is #1 in the cloud. 

No doubt, Amazon is the category king in public-cloud IaaS. It deserves great credit for that achievement. 

But unlike some inside-the-bubble cloud-taxonomy purists, business customers don’t view the cloud as some sterile and discreet boxes of technology. Rather, to them the cloud is an accelerator of innovation, a simplifier of business processes and the foundation for digital business.

Business customers know that the cloud means much more than just IaaS. And those business customers are increasingly paying more attention to and spending more money on the software portions of the cloud, where the greatest differentiation can occur.

Microsoft’s ability to be not only a major player in IaaS but also in PaaS and SaaS is a primary reason why it is the worldwide leader in the cloud as judged by business customers. Look at the numbers: in the quarter ended Sept. 30, those business customers spent $11.6 billion on Microsoft’s commercial-cloud services and technologies. In the same quarter, they spent $9 billion on those offered by AWS.

That means business customers—the ultimate judges of value, market leadership, and category validation—have decided to make Microsoft’s cloud business 29% larger than Amazon’s cloud business.

Google Cloud’s coming on strong behind CEO Thomas Kurian. But even the most-aggressive estimate of its Q3 revenue—let’s call it $2.5 billion—is dwarfed by Microsoft’s $11.6 billion.

And those revenue figures are simply reflections of market reality. So when we see that Microsoft’s cloud revenue is almost 5 times larger than Google’s, it is not unreasonable to assume that Microsoft’s universe of AI customers exceeds the number that Google has by a factor of at least 2, probably 3 or perhaps even higher.

All industries begin with industry-driven definitions, perspectives, priorities, and measures of success. But ultimately, successful industries transition to customer-centric perspectives—or, they become irrelevant and fade into oblivion.

The business world of the future will be built on the cloud and powered by AI. And so far, Microsoft’s numbers reveal that it is the unquestioned leader in both the cloud and the related field of AI.

And that’s why it’s #1 in the Cloud Wars.

Disclosure: at the time of this writing, Microsoft, Google Cloud and IBM were clients of Evans Strategic Communications LLC and/or Cloud Wars Media LLC.

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