The Haziness in Microsoft’s Cloud Numbers

Here’s a quick question for enterprise software acolytes out there: which tech giant is bigger in cloud, Microsoft or Amazon?

It depends. Microsoft says total revenue for “Microsoft Cloud” was $91 billion in the year to June, which is significantly more than AWS’ $72 billion for the same 12-month period. But the “Microsoft Cloud revenue” number includes contributions from many different parts of Microsoft—everything from its Azure cloud-services “infrastructure” unit to applications such as Office 365 and most of LinkedIn. Amazon Web Services, in contrast, is primarily infrastructure—selling data storage and compute power—with little in the way of applications. Microsoft doesn’t disclose Azure’s revenue. According to Gartner, AWS has 39% of the global cloud-infrastructure market to Microsoft’s 21%.

This reporting haziness is par for the course for the cloud industry, where defining revenue is more of an art than a science. In their reported cloud revenue numbers, both Microsoft and Google include the infrastructure side of the cloud with applications that run on those services, such as word processing, human-resources tools, and email. Oracle used to be in that camp as well but last week it began breaking out cloud infrastructure from applications, giving investors a better window into its performance.