AWS Grows 28% as Amazon Hits Record Profit Margin, Microsoft Cloud Slows

TL;DR: Amazon’s AWS posted 28% year‑over‑year growth, lifting the retailer’s net profit margin to a record 16.7%; Microsoft’s cloud revenue rose 29% YoY, marking a slowdown from its usual mid‑20s pace.

Context Amazon (AMZN) and Microsoft (MSFT) released earnings on April 29, each highlighting cloud computing as the primary growth engine. Amazon’s stock is up roughly 20% year‑to‑date, while Microsoft’s has slipped more than 10%, setting divergent market narratives.

Key Facts - AWS revenue climbed 28% from the prior year, continuing an acceleration that saw 13% growth in 2023, 19% in 2024, and 20% in the most recent fiscal year. - Microsoft’s cloud segment grew 29% YoY in its fiscal Q3, the quarter ending March 31, a modest edge over AWS’s rate but still below the low‑to‑mid‑20% range it has sustained for several years. - Amazon posted a net profit margin of 16.7% in Q1, the highest margin in its history, on total revenue of $181.5 billion. - Microsoft reported a net profit margin of 38.4% for the same period, slightly above its prior‑year level, on revenue of $82.9 billion. - Amazon’s high‑margin advertising grew 24% YoY and its AI chip business reached a $20 billion annual run rate, together accounting for about 30% of total revenue. - Microsoft’s AI services hit a $37 billion annual run rate, a 123% YoY jump, while its Xbox content sales fell 5% YoY.

What It Means Amazon’s faster‑growing cloud platform, combined with expanding advertising and AI chip sales, is reshaping its profitability profile. The record margin suggests the company is shedding the low‑margin drag of its e‑commerce logistics, positioning AWS as a cash‑generating engine that now underpins a larger share of earnings. Microsoft, while still delivering higher overall profit margins, shows its cloud growth losing steam. The 29% increase, though robust, signals a return to the mid‑20s growth band that has characterized its cloud business for years. Meanwhile, Microsoft’s AI revenue surge offsets slower cloud momentum, but its consumer‑focused segments, such as Xbox, are contracting. Investors may view Amazon’s diversified high‑margin streams as a catalyst for continued earnings acceleration, whereas Microsoft’s reliance on a broader mix of productivity, cloud, and personal computing could temper expectations for rapid margin expansion.

Looking Ahead Watch the next quarterly reports for signs of whether AWS can sustain its acceleration and if Microsoft’s AI revenue can compensate for a plateauing cloud business.