Shift to Public Cloud Credit Suisse (SIX:CSGN) research analysts led by Phil Winslow provided a deep dive into Microsoft's (NASDAQ:MSFT) cloud computing service product Azure.
In the wide-ranging research note, the analysts told investors that they expect Microsoft Azure, as the “enterprise cloud,” to disproportionately benefit from an accelerated shift to the public cloud.
Winslow said they also anticipate Azure will; continue to narrow the revenue gap to Amazon (NASDAQ:AMZN) Web Services, which is currently number one in the field. In addition, Google (NASDAQ:GOOGL) Cloud is said to be driving sustained growth for Microsoft and a meaningful upside to the consensus estimate.
"Businesses are intently moving forward on multi-year, “strategic” cloud-first transformation roadmaps—a transition from the initial rush into the cloud as a means to “triage” IT systems during the COVID-19 pandemic," wrote the analysts. "Although Wall Street remains largely positive on Microsoft, we believe the full multi-year impact of Azure’s growth opportunity is still not properly reflected in consensus estimates."
The analysts also compared the revenue growth of Azure and Amazon's (AMZN) AWS.
"Azure has grown meaningfully faster than AWS when achieving revenue run-rate milestones of ~$500 million, ~$1.0 billion, ~$1.5 billion, ~$2.5 billion, ~$3.25 billion, ~$4.0 billion, ~$5.0 billion, and ~$7.5 billion and continued to grow faster after reaching these benchmarks as compared with AWS," said Winslow. "However, after achieving a ~$10.5-billion run-rate in Q2 FY2022, consensus forecasts Azure’s growth differential narrowing completely within four quarters and then inverting relative to AWS’s growth in the corresponding periods after achieving a run-rate of ~$10.5 billion, which we view as overly conservative considering Azure’s sustained outperformance following all eight preceding benchmarks."
By Sam Boughedda