Cloud Showdown: AWS Holds Ground, but Azure Gains Ground on AI-Led Growth
Amazon delivered a solid first-quarter performance, with revenue of $155.7 billion, up 9% year over year and slightly above the Street's estimates of $155.2 billion. Moreover, operating income rose to $18.4 billion, above the Street's expectation of $17.5 billion and indicating the long-term health of the company's core businesses.
AWS Net Sales growth, source: Amazon investor relations
At the heart of Amazon's profitability story remains Amazon Web Services. AWS generated revenue of $29.3 billion, up slightly from $28.8 billion last quarter and a 17% year-over-year jump. Operating income at the cloud business jumped to $11.5 billion, from $9.4 billion in Q1 2024, cementing AWS as Amazon's high-margin crown jewel and primary growth engine.
Slowdown in AWS revenue growth - source bloomberg.com
Nevertheless, the quarter was not free of competitive stresses. Microsoft's Azure platform once more grew faster than AWS, expanding 33% year-over-year—almost twice the rate of Amazon's cloud business. Microsoft attributed almost half of that growth to AI-driven demand, reflecting its early advantage in AI adoption among enterprises. The company posted overall revenue of $70.1 billion, a rise of 13%, and earnings of $3.46 a share, both easily exceeding expectations.
Azure and other cloud services growth y/y
Azure and other cloud services growth (y/y) source: Microsoft investor relations
Alphabet's Google Cloud is also solidifying its position as the third-largest cloud vendor. The division recorded first-quarter revenue of $12.8 billion, year-over-year growth of 28%, and operating income of $2.18 billion—much better than expected. Similar to Microsoft and Amazon, Google is experiencing more demand from corporate clients for AI infrastructure and services.
Google Cloud Revenues Q1 2025, source: alphabet investor relations
Looking ahead, Amazon offered a more restrained forecast. For the second quarter, it expects operating income of $13 billion to $17.5 billion, falling short of the $17.8 billion forecast. Revenue guidance of $159 billion to $164 billion is in line with expectations. CEO Andy Jassy cited ongoing macro uncertainties, including trade tensions, currency volatility, and overall economic volatility, as risks to the months ahead.
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