Microsoft and Amazon: Riding AI Hyperscaler Convictions
Trend Analysis
Microsoft’s earnings release on the 30th of July this year marked the end of its full Fiscal Year (FY) 2025 ended in June. For the recently concluded FY, Productivity and Business Processes (PBC) – which has its business products tie into the company’s Azure and cloud services – showed an explosive 55% growth relative to FY 2024, leading to a 15% increase in overall revenue, despite Personal Computing (which centres around consumer spending) dropped by 12%.
Source: Company Information; Leverage Shares analysis
While the relative maturity of the personal computing segment yields a solid 17% growth in operating income despite this drop in revenue, both PBC and Intelligent Cloud – which holds Azure and other cloud services in its core – delivered near-similar operating income growth, despite the latter only showing a 1% growth in revenue.
While consumer cloud services remain at the 3% revenue share level from FY 2023 to FY 2025, corporate spends on cloud-based business solutions have grown 63% to 66% in the same period.
Source: Company Information; Leverage Shares analysis
Nearly every other product and service – ranging from Gaming to LinkedIn – have seen a relative drop in comparative revenue share over the previous year. Overall, revenue and earnings per share (EPS) growth march in lockstep, making Microsoft a stable performance provider for the portfolio.
The company maintains confidence in the Intelligent Cloud segment being a driver of future performance, with Microsoft’s chairman and CEO Satya Nadella stating that Azure surpassed $75 billion in revenue – which is up 34% in quarter-on-quarter terms – driven by growth across all workloads.
Next, Amazon’s earnings release for its second quarter (Q2) of its FY 2025 was on the 31st of July and laid strong emphasis on the consumer-facing e-commerce benchmarks. However, as the financial line item trends indicate that, as of the first half (H1) of 2025, its business-facing AWS segment remains the backbone of the company – as it has for several years now – and which is now leading to its stock’s rise as part of the AI Hyperscaler conviction.
Source: Company Information; Leverage Shares analysis
While e-commerce serves to drive the vast majority of the company’s revenue – and which the company uses to drive synergies with its content business – the fact remains inescapable that e-commerce (and content) are expensive endeavours. For instance, in FY 2024 alone, while e-commerce and content drove 82% of net sales, they together accounted for 88% of operating expenses and only 42% of operating income. In contrast, AWS accounted for only 17% of net sales and provided a whopping 58% of operating income.
The pass-through effects of AWS’ outsized contribution on bottom-line trends are telling: if current trends were to continue, Amazon will close out the year with only a 2% growth in net sales but a solid 18-20% growth in both net income and diluted EPS. Amazon CEO Andy Jassy – who led AWS prior to becoming the CEO – seems to recognize AWS’ place within the company: over H1, Amazon incurred $55.4 billion in capital expenditure (capex), which implies a net expenditure of $118 billion1 for FY 2025 versus its previous forecast of $100 billion. In FY 2024, Amazon’s capex hit $83 billion and primarily went toward building out infrastructure to support artificial intelligence demand.In Conclusion
Both Microsoft and Amazon are en route to building a niche within the rubric of “AI Hyperscalers” that’s likely to play out in more pronounced terms in the years to come. While Microsoft is arguably on the cusp of transforming its revenue streams, Amazon is closer to having AI be front and center in the driving conviction. In other words, the “consumer” is being overshadowed by the “corporate” in both company’s fortunes and “corporates” remain steady buyers into the AI growth story.
Footnotes:
- "Amazon stock sinks 8% after earnings: Here are the key takeaways", CNBC, 1 August 2025