Microsoft (MSFT, Financial) regained cloud momentum as Azure grew 34% in Q1—outpacing both AWS and Google Cloud—driven largely by non-AI migrations and tighter execution.
Azure's share gain marked a slight uptick from 33% growth in Q4, buoyed by a rush of enterprise workloads shifting on-premises SAP (SAP, Financial), Oracle (ORCL, Financial) and VMware environments into Microsoft's ecosystem.
Jefferies' Brent Thill attributes the surprise surge to “accelerated growth in cloud migrations from enterprise customers and execution improvements in non-AI go-to-market,” while noting AI workloads still lifted growth by 16 points, up from 13 points last quarter amid easing supply constraints. Microsoft's guidance for 34–35% constant-currency growth further allays fears of a post-AI bump slowdown.
UBS's Karl Keirstead echoes the migration thesis but cautions that drawing a hard line between AI and non-AI workloads is increasingly difficult as customers blend analytics, data services and AI inference on the same Azure infrastructure.
He highlights OpenAI's escalating Azure usage as a wildcard, alongside a possible “in-house” shift from Microsoft's Server Products to cloud-native deployments and growing uptake among mid-market firms. Even against a backdrop of macro uncertainty, large enterprises appear to be accelerating cloud commitments—suggesting Azure's value proposition around hybrid compatibility and broad data services remains compelling.
While AWS and Google Cloud posted robust growth, neither has matched Azure's recent acceleration, prompting debate over whether Microsoft can sustain this edge. With ongoing investments in data platform enhancements, AI integration tools and global data-center expansion, Azure may have engineered a virtuous cycle of performance that further attracts heavyweight workloads. Analysts will be watching to see if Microsoft can convert its Q1 wins into sustained share gains throughout fiscal 2025.
Why it matters: Investors get renewed confidence that Azure's diversified growth drivers—beyond headline-grabbing AI—can underpin steady revenue expansion and support MSFT's cloud leadership thesis.
Investors will now focus on Q2 earnings in late July and gauge whether Azure's migration-led growth and blended AI demand can outpace industry peers again.
