Amazon, Microsoft 'Cloud Arms Race Hitting Another Gear' With Bezos Replacement: Wedbush

The elevation of Amazon.com, Inc AMZN executive Andy Jassy, who heads Amazon Web Services, to the position of CEO represents that "cloud arms race" with rival Microsoft Corporation MSFT is "hitting another gear," as per Wedbush analyst Daniel Ives. 

The Analyst: Ives maintained his Outperform rating on Microsoft with a 12-month price target of $285. The analyst’s 12-month target on Amazon is $3,900.

The Thesis: Ives described Jassy as an “undisputed cloud titan” and said he was key in getting AWS to the “cloud mountaintop over the past decade.” The analyst wrote there is a tidal shift in the cloud arms race. 

“Microsoft coming off its recent 50% Azure growth number is taking market share vs. AWS (28% YoY growth this quarter) based on our analysis.”

The appointment of Jassy as the CEO  doubles down Amazon’s focus on AWS, as per the analyst.

Microsoft only has about 35% penetration of its installed base on cloud transition, as per the analyst's estimates, who said that Azure’s cloud momentum “is still in its early days of playing out within the company’s massive installed base.”

Ives said Office 365  transition for both consumer/enterprise is providing “growth tailwinds” to Microsoft’s cloud efforts over the next few years.

The Wedbush analyst noted that 85%-90% of cloud deployments have already been “green lighted” by CIOs and healthy cloud budgets are in place for this year.

The cloud-driven architecture IT growth in 2021 could surpass the growth seen in 2020. Beneficiaries of this also include International Business Machines Corporation IBM, Alphabet Inc GOOG GOOGL subsidiary Google along with Microsoft and AWS.

“Redmond [is] firmly positioned to gain more market share vs. AWS in this cloud arms race,” wrote Ives.

Price Action: Amazon shares closed 1.11% higher at $3,380 on Tuesday and gained 0.3% in the after-hours session. On the same day, Microsoft shares closed mostly unchanged at $239.51 and gained nearly 0.3% in the after-hours trading.