AWS Growth Acceleration Gives Amazon an Edge Over Microsoft
Amazon's cloud computing business, Amazon Web Services (AWS), is outperforming Microsoft Azure in terms of growth acceleration. While AWS grew by 37% in its latest quarter, Microsoft Azure grew by 43%. However, a closer look at the trend lines reveals that AWS' growth rate is accelerating rapidly, from 28% in Q1 to 24% in Q4 2025 and 20% in Q3 2025.
Microsoft Azure's growth rate, on the other hand, has remained relatively constant. Despite being rapid, its growth rate was 43% during Microsoft's fiscal 2026 Q4, but only slightly higher than the previous quarter's 40%. This lack of acceleration is concerning, especially considering the significant investment Microsoft is making in capital expenditures for Azure.
The key factor that sets Amazon apart from Microsoft is the impact of AWS' growth on its profits. As AWS grows faster than Amazon's other businesses, the company's overall operating margin increases, driving profit growth ahead of revenue growth. In contrast, Microsoft's Azure growth may not be enough to offset a potential decline in its overall operating margin.
Amazon's cloud computing business is poised for continued growth due to significant investments in infrastructure and capacity expansion. This sets up Amazon's stock for potentially incredible returns over the next few years, making it a more attractive investment than Microsoft.