Microsoft's Azure cloud revenue is about one-tenth the size of Amazon's, says analyst

Satya NadellaMicrosoftMicrosoft CEO Satya Nadella

Later this month, when Amazon announces earnings, the industry will finally see just how big the acknowledged leader in cloud computing
really is.

Amazon will for the first time break out revenue for its cloud.

Various Wall Street analysts, including Citi and Deutsche Bank estimate that Amazon’s cloud unit, known as Amazon Web Services (AWS), will be about a $US6 billion business in revenue in 2015, up from about $US4.6 billion in revenue in 2014.

Deutsche Bank also believes that Amazon’s cloud books way more revenue than Microsoft’s direct competitor, Azure. In a research note, Deutsche Bank’s Karl Keirstead wrote:

We estimate that Azure revenues are in $US500-$US700 million range, based on disclosures that Microsoft has made about the other portions of the “Commercial Other” revenue bucket in which Azure is included, and on independent field checks. We estimate AWS revenues at ~$US6 billion, making AWS up to 10x larger than Azure. While our Azure revenue estimate is below what we believe is the Street consensus estimate of $US1+ billion, the consensus from our recent checks was that Microsoft is having material success driving Azure adoption and that Azure growth will be substantial in 2015.

Microsoft doesn’t yet break out its cloud computing business, although CEO Satya Nadella has said that all of the company’s cloud computing businesses are on track to generate $US5.5 billion this year.

That, however, includes its online version of Office, Office 365, which, by all accounts is selling like hotcakes these days.

The street’s general consensus is that Office 365 makes up the lion’s share of Microsoft’s cloud revenues with Azure is on track to generate $US900 million – $US1 billion this year. So Keirstead’s view is a bit bearish compared to other analysts.

Numbers leaked to Business Insider show that Microsoft has booked about $US1 billion in Azure revenue, total, since 2011. We also learned that there are about 3,000 enterprise customers for Azure, and until this year, a good percentage of those customers weren’t really using it. They were counted as customers because their larger software contracts included access to Azure, whether they used it or not.

Nadella began pressuring its salesforce big time to get those customers to use the Azure credits they paid for and then some.

The pressure is working and as of 2015, the leaked documents showed that more of these classic enterprise customers are starting to use Azure. (Though sources close to the company has also told us that the pressure has been very stressful for many salespeople and is affecting the way they get paid.)

Azure still has a long way to go to catch Amazon, but 2015 could be a breakout year for that.

Disclosure: Jeff Bezos is an investor in Business Insider through hispersonal investment company Bezos Expeditions.

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