Its cloud computing business has advanced mightily in the last couple of years, so it’s not surprising that analysts are bullish about Microsoft (NASDAQ:MSFT) and MSFT stock. However, if you think Amazon (NASDAQ:AMZN) should be looking over its shoulder, you’ve got another thing coming because the two companies’ situations aren’t mutually exclusive.

Here’s why.

Amazon Still Growing AWS

According to Synergy Research Group, Amazon Web Services saw its share of the cloud infrastructure market move sideways in the first quarter of 2018 at 33%, while Microsoft’s market share advanced 300 basis points to 13%, putting it solidly in second place on a global basis.

Microsoft supporters point out that, on a sequential basis, AWS actually lost 100 basis points of market share in Q1 2018.

“Microsoft’s share of the cloud infrastructure market increased to 13% in the first quarter of 2018 from 10% in the prior-year period,” wrote Motley Fool contributor Harsh Chauhan on May 30. “Google, on the other hand, saw a 1 percentage-point increase in its market share, to 6%. Amazon’s market share, meanwhile, was flat year over year and fell 1 percentage point sequentially.”

While the sequential bit is true, it’s vital to consider AWS’ business on its own merits.

In the first quarter, AWS sales increased 49% year-over-year to $5.44 billion, and that’s on top of 43% growth in Q1 2017. Also, its growth was 6.5% higher on a sequential basis from Q4 2017.

“AWS services are by far the most evolved and most functionality-rich. AWS lets developers do more and be nimbler, and it continues to get even better every day,” stated Jeff Bezos in its Q1 2018 press release. “That’s why you’re seeing this remarkable acceleration in AWS growth, now for two quarters in a row.”

The fact is, Microsoft is gaining market share, but not necessarily at the hands of Amazon.

The Cloud Is a Big Reason to Own MSFT Stock

Microsoft’s Azure is doing so well that CEO Satya Nadella reorganized the company’s structure in late March, putting Scott Guthrie in charge of both its cloud and AI initiatives.

Nadella has a vision that very much includes cloud computing, and the market share it’s grabbing justifies the company’s allocation of resources to this area.

However, I don’t believe that Amazon shareholders need to be looking over their shoulders as a result of Microsoft’s gains. Instead, all of the other big players in cloud computing will cede market share over the next 12-24 months with Amazon and Microsoft dominating this arena.

“While Azure is not going to establish the monopoly position that Windows enjoyed, we believe it is addressing a much larger market that is still in the early stages of development,” Atlantic Equities analyst James Cordwell wrote in a June 25 note to clients. “We model Amazon Web Services and Azure reaching $185 billion and $115 billion revenue in 10 years’ time, implying roughly 70 percent combined share of the market at that time.”

In a cloud computing market Cordwell estimates will be $429 billion in 2028, Amazon and Microsoft will own 43% and 27%, respectively.

The Bottom Line on MSFT Stock

If Cordwell’s estimates come true, Amazon will gain another 10% market share, but Microsoft will be the big winner, grabbing an additional 14% market share over the next decade.

So, if you own Amazon, this is a non-story. If you own MSFT stock it’s a very big deal, and if you own any of the rest, it’s not what you want to hear.

As of this writing Will Ashworth did not hold a position in any of the aforementioned securities.

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