Microsoft’s AI boost helped cloud business outpace
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Microsoft is outpacing its top competitors in the high-stakes cloud computing race.

After a big week for tech earnings, most mega-cap tech companies have released their third-quarter results. On the cloud side, Microsoft reported a 29% growth in Azure. The pace of expansion at AWS, which reported 12% growth, is more than double that of Google Cloud, which reported a 22% growth.

Microsoft may be picking up business even though Amazon Web Services still leads the pack in terms of overall market share, because companies want to run their artificial intelligence models on Azure. Founded in 2019, Microsoft has already funded OpenAI’s ChatGPT chatbot and other products by providing the underlying computing power.

Microsoft CEO Satya Nadella told analysts on a Tuesday conference call that “we are seeing new AI projects being started because of our leadership position.” Artificial intelligence projects go beyond AI meters, he said.

About 3 percentage points of Azure’s growth was attributed to AI, compared to management’s forecast of 2 points. As compared with the previous quarter, the growth rate accelerated from 26% to 33%. Google’s growth decelerated from 28% to 20%. During the second quarter, AWS grew in line with expectations.

In a note to clients published Wednesday, Bernstein Research analysts led by Mark Moerdler said Microsoft’s results were a sign the software maker “has taken the AI mantel from Google, and Azure could become a much larger and more important hyperscale provider than Amazon Web Services.” Their report noted that Microsoft’s capital expenditures increased to $11.2 billion from $10.7 billion.

It may be that Microsoft is growing faster than its top competitors, but they are all putting a lot of emphasis on artificial intelligence.

Alphabet CEO Sundar Pichai said on the company’s earnings call that more than half of all generative AI startups were Google cloud customers.

Former AWS CEO Andy Jassy told analysts that Amazon is surprised by the pace of growth in generative AI, which can create blog posts, advertising copy and email messages based on human input.

According to Jassy, “our generative AI business is growing very quickly.”.