Microsoft’s Data Center Investment Pays Off As Cloud Business Doubles

Microsoft data centers, like this one, host the infrastructure for the company’s Azure cloud platform.
Microsoft data centers, like this one, host the infrastructure for the company’s Azure cloud platform.

Amazon Web Services (AWS) is hailed as the dominant public cloud provider, and deservedly so, as they have as much cloud business as their next 170 or so competitors combined. But that number will be changing and one reason is the eye-popping growth of Microsoft’s Azure cloud services business.

Microsoft executives have spoken of investing more than $10 billion per year in data centers. That capacity is paying off as the company’s first quarter 2017 earnings report shows tremendous growth. Total compute usage by Microsoft cloud customers has more than doubled in the past year. Cloud revenues are up 116%, while the company’s legacy Windows business was flat over the same period.

People may look for reasons to no longer use the Microsoft’s traditional products, and their search engine play was far from a success. But cloud adoption is lifting Microsoft’s fortunes, driving the company’s stock into the $60 range, eclipsing the company’s all-time highs from late 1999.

While AWS recently inked a deal with VMware to enable hybrid computing models, Microsoft CEO Satya Nadella touts his company’s built-in ability to handle the growing demand for hybrid within their own product set, as well as claiming greater global reach than AWS.

Microsoft’s existing relationships build a bridge to hybrid services through the Azure cloud platform. The growth in their recent earnings report illustrates the rapid adoption of cloud and hybrid services by the company’s massive customer base, as well as likely portending significant additional data center investments by the tech giant.