Microsoft Azure Vs. Amazon AWS: Who Wins?

In a report published Sunday, Deutsche Bank analyst Karl Keirstead took a closer look into Microsoft Corporation (NASDAQ: MSFT)'s Azure cloud infrastructure and Amazon.com, Inc. (NASDAQ: AMZN)'s rivaling AWS service.

According to Keirstead, Azure revenues fall in a range of $500 to $700 million and accounts for 1 to 2 percent of Microsoft's total revenue base. AWS' revenue stands at around $6 billion, implying Amazon's service is up to 10 times larger than Microsoft's.

Keirstead said that despite the obvious size difference, Microsoft's Azure service has garnered out-sized attention from investors given the growth profile and the impact that this low-margin business could have on Microsoft's profit. The analyst did add that Azure is "closing some gaps" and can "speak enterprise" in a way that AWS can't, but checks revealed that Azure is too tethered to the Microsoft stack. Nevertheless, Microsoft should see "material success" in driving Azure adoption and that Azure growth will be "substantial" in 2015.

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The analyst's checks AWS will likely maintain its "overwhelming" lead in cloud infrastructure services over rivals including Azure, Google Inc (NASDAQ: GOOG) (NASDAQ: GOOGL) and International Business Machines Corp. (NYSE: IBM) due to its scale, low price and success in moving "up the stack" to premium services.

Bottom line, Keirstead stated that the market is a two-horse race between AWS and Azure but there is room for additional vendors to disrupt the space. Between Microsoft and Amazon there is no clear winner as AWS could emerge as the "Microsoft of the next era" but Microsoft also likely has designs of its own to fend off competition over the near-term.