Amazon vs Microsoft: Who’s Winning the AI Cloud War in 2025?

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: Who’s Winning the AI Cloud War in 2025?

Although AI models are yet to mature into consistent reliability, the trend is already clear. By inferring patterns from data, they can generate outputs at level and scale not seen in recorded history.

This capacity spans content generation in all forms, as well as coding, image and language processing for the purpose of predictions and recommendations. In turn, AI’s capacity relies on cloud infrastructure via data centers.

This translates to hyperscalers being the key intermediaries between AI models and humans. On Monday, we explored what this means for Alphabet (NASDAQ:) as the company pours $75 billion into AI infrastructure this year alone. But where do

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.com (NASDAQ:) and

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(NASDAQ:) fit into this emerging AI landscape with their respective AWS and Azure cloud offerings?

Indicative AMZN Stock Dip

On Thursday, the e-commerce and logistics giant

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.com suffered a 5% stock sell-off following the Q1 2025 earnings report. This was short-lived, however, as many investors saw this as a buy-the-dip opportunity. Nonetheless, over the week, AMZN stock returned flatlined gains at 0.9% vs much more performant MSFT at 9.6% gains.

The culprit was misaligned expectations. Namely,

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’s cloud division

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Web Services (AWS) reported 16.9% quarterly growth at $29.27 billion, under the expected analyst consensus of 17.4% at $30.9 billion revenue.

Although a double-digit growth for such a wide moat company is still impressive, the performance matters in relative terms. A day earlier on Wednesday,

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reported its Intelligent Cloud division grew quarterly by 20.8% at $26.75 billion, with Azure specifically gaining 33% growth.

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’s Azure performance beat the Visible Alpha estimate of 29.7% at $26.13 billion. According to

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’s CFO, Azure actually outperformed due to non-AI related services, while the AI boost, contributing 12 – 16%, was in line with expectations.

Moreover,

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boosted investor confidence with a stronger than expected

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for its cloud services at 34% – 35% growth for fiscal Q4, which is calendar Q2.

Investors Rightfully Shift Focus to AI

Overall,

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beat earnings per share (EPS) estimate of $1.35 at $1.59, giving AMZN shareholders a 17.78% positive surprise for Q1.

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’s EPS beatdown was more muted, beating estimated $3.2 at $3.46, giving MSFT shareholders a positive 8.13% surprise.

Given that weekly AMZN vs MSFT stock performance is clearly on

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’s side, at +0.9% vs +9.6% respectively, it is clear that investors approach Big Tech with a higher expectation bar. This is reflected in their forward price to earnings (P/E) ratios, with

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at 28.41 and

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at 28.74, both of which are above the average P/E for the IT sector at 22.7.

AI cloud support is now the focal point for these higher expectations. After all,

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CEO Andy Jassy told shareholders in February’s earnings call that AI is “a once-in-a-lifetime type of business opportunity”.

So far,

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’s allotted capex into AWS for AI is worth $100 billion, above its peers Alphabet ($75B), Meta (NASDAQ:) ($65B) and

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($80B) for fiscal 2025. A large part of that high investment comes from

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’s need to maintain its global cloud market share, at 30% vs Azure’s 21%.

However, each company has its own strategic ecosystem integration approach that may benefit

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in the long run.

Competitive Advantage:

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?

Both

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and

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employ usage-based billing for their cloud services. This spans across AWS’ SageMaker and Azure Machine Learning for training and inference workloads. Likewise, both companies bundle enterprise agreements for volume discounts alongside pre-pay reserved instances for compute capacity.

All of this is bundled with ample storage, typically costing fractions of a cent per stored gigabyte. Yet,

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has greater footing owing to its existing software ecosystem and tight relationship with OpenAI, creators of ChatGPT.

So far,

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-backed Anthropic’s Claude 3.7 Sonnet is lagging severely behind, dominated by OpenAI’s o4-mini, Alphabet’s Gemini 2.5 Pro, and again OpenAI’s o3 model. Even China’s DeepSeek outperforms Claude at this point in time.

And although

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’s Bedrock offers a multi-model approach with Anthropic (Claude), Stability AI, Meta (Llama) and its own Titan models, Azure’s AI Foundry (formerly Azure AI Studio) offers seamless, user-friendly and deep integration with

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365 and Dynamics 365.

In other words, at this stage of AI development, AWS for AI is more suited for developers who switch between different foundation models to test AI waters. But as experimenting has its own associated costs, it is likely that enterprises will seek Azure’s road of least resistance.

Lastly, branding will also play a role in cloud adoption.

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is known worldwide as a legacy software specialist, while

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is known as a hybrid company serving many roles.

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: Stock Price Forecasts

Year-to-date, MSFT stock is up 4.4% while AMZN stock is down 14%. According to Wall Street Journal’s forecasting data, the average MSFT price target is $501.48 against its current price of $434.26 per share. This gives

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shareholders a potential 15% upside.

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’s average stock price target is $244.84 against the current price of $190.20 per share. This gives

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shareholders a potential 28% upside, nearly double the gains from MSFT.

In the end, both companies’ advantages are not going anywhere, so it is worth investing in both whenever stock markets experience major dips. With that said, at a market cap of $3.25 trillion, it will become increasingly more difficult to move

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’s weight, which makes

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’s $2 trillion market cap more attractive.

And although

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’s bet on OpenAI appears to be the winning one, nobody knows for certain if that will be the case in a year’s time.

***

Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our

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prior to making financial decisions.

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#Whos #Winning #Cloud #War

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