Microsoft Corporation MSFT CEO Satya Nadella has said that working with leading AI startups like OpenAI helps sharpen the company's cloud infrastructure and product development, drawing a parallel to a time when he wished Netflix Inc. NFLX had chosen Azure over Amazon.com, Inc.'s AMZN Amazon Web Services.
Nadella Wanted Netflix On Azure, Not AWS
During Microsoft's fiscal fourth-quarter earnings call on Wednesday, Morgan Stanley analyst Keith Weiss asked Nadella how the company manages the balance between supporting fast-growing AI startups — which are both major customers and potential competitors — and ensuring long-term value for Microsoft's cloud business.
In response, Nadella said Microsoft has been in similar positions before, referencing early cloud adoption in the streaming era.
"Back in the day when I was getting started on Azure, I used to look over the lake and sort of see Netflix and Amazon, and I say, ‘I wish Netflix ran on Azure,'" Nadella said. "And in some sense, that's kind of what we now have… the largest AI workloads run on Azure."
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AI Startups Like OpenAI Help Microsoft Optimize Its Cloud Stack
He explained that these high-demand AI applications, like ChatGPT and Copilot, allow Microsoft to optimize its entire data and software stack — including tools like Cosmos DB — around the needs of cutting-edge workloads.
"These are workload results that are invaluable for us to learn to build both the products as well as the platform," he said.
Microsoft Eyes Broad Adoption Beyond Leading AI Players
Nadella underscored that Microsoft's strategy includes not just supporting headline AI startups but also tracking usage across a "broad diffusion" of second-tier AI apps, ensuring scalability and relevance for a wide customer base.
Azure Posts Strong Growth, Hits $75 Billion In Annual Revenue
Microsoft reported fourth-quarter revenue of $76.44 billion, marking a 17% year-over-year increase and surpassing the Street estimate of $73.80 billion.
The Intelligent Cloud segment brought in $29.9 billion, up 26% from a year ago. Azure and other cloud services within the Intelligent Cloud segment posted a 39% year-over-year revenue increase.
Nadella noted that Azure crossed $75 billion in revenue for the full fiscal year, up 34% year-over-year.
Microsoft Still Trails AWS In Global Cloud Market
As of the fourth quarter 2024, AWS maintains its lead in the global cloud infrastructure market with a 30% share, according to Synergy Research Group.
Microsoft Azure followed at 21%, and Alphabet Inc.'s GOOG GOOGL Google Cloud held 12%. Together, the “Big Three” controlled over 60% of the market, while all other providers remained in the low single digits.
Price Action: On Wednesday, Microsoft shares edged up 0.13% during regular trading and jumped 8.28% in after-hours trading, according to Benzinga Pro.
Benzinga’s Edge Stock Rankings show that MSFT maintains strong momentum across short, medium and long-term periods, although its value rating remains relatively low. Additional performance details are available here.
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