Cracks are forming at the seemingly once-invulnerable top of the NASDAQ as Wall Street realizes that the FANG group — Facebook Inc (NASDAQ:FB), Amazon.com, Inc. (NASDAQ:AMZN), Netflix, Inc. (NASDAQ:NFLX) and Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG) — were never going to work hand in hand with the rest of the computing giants, much less each other. The recent launch of new cloud computing systems from Microsoft Corporation (NASDAQ:MSFT) only shows how fiercely the competitive tech tides can turn.
For one, MSFT has scale and a home-court advantage on its side. Its commercial cloud-driven data solutions are racking up $15 billion per year in revenue, and where the new Azure generation is concerned, that cash flow is growing 90%-100% year over year.
As the upstart, AMZN has done extremely well rolling up the easy accounts that really only need to share storage space on the company’s vast server farms. This is the low end of the cloud, though, selling access to computing infrastructure as a utility. And while those easy pickings have helped grow Amazon Web Services (AWS) to roughly the size of the Microsoft cloud, 42% growth in that space isn’t even half of what Azure has been producing.
Believe It or Not, Amazon Can’t Catch Microsoft
Run the numbers and you’ll see that it would take a dramatic upset for AMZN to pull ahead of MSFT in terms of raw cloud cash flow. While the bases are comparable, one company is reaping big buzz for half the growth of the other.
Don’t get me wrong — I love AMZN as the great retail disruptor, but renting server space is a marginal sideshow in the face of that main event. Even if this is where the sizzle is for Wall Street, management is focused on innovating elsewhere. They don’t have a lot of huge game-changing plans for the cloud right now.
MSFT has a little more ambition in this space, though. Azure has always had the upper hand when it comes to layering operating systems and other software on top of the servers that cloud customers rent. Since that’s where the sweetest part of the value chain happens to be, in terms of account wins and profitability, every win for Azure has a little more weight than one for AWS.