As Microsoft posts $75B in Azure revenue, UK’s CMA says “competition is not working well”

by

The UK’s Competition and Markets Authority (CMA) is scrutinizing both Microsoft and Amazon, focusing particularly on their activities in the cloud services market. The CMA is examining this sector to ascertain whether any practices might be inhibiting fair competition.

According to the Competition and Markets Authority (CMA), “the current competition structure isn’t functioning optimally,” and they have proposed solutions to address this issue. In their investigation, an independent CMA panel concluded that the cloud services market is excessively concentrated, with Microsoft and Amazon Web Services (AWS) holding significant dominance, each accounting for approximately 40% of the market share.

In the realm of cloud services, Amazon Web Services (AWS) leads the way in revenue generation, while both AWS and Microsoft’s Azure make substantial earnings. Compared to other players in the market, these two giants hold a significant share that is hard for competitors to match. According to the panel’s findings, it will be challenging for other cloud providers to narrow this gap, as the extensive influence and dominance of AWS, along with Microsoft’s Azure, makes it tough for others to keep pace.

But Microsoft is in a unique position due to its licensing practices, according to the panel:

Microsoft’s licensing policies appear to be disadvantaging Amazon Web Services (AWS) and Google in the provision of cloud services, specifically when it comes to customers who incorporate Microsoft software into their cloud service purchases. This situation seems to weaken the competitive pressure from AWS and Google, Microsoft’s main competitors, leading to less competition in the market for cloud services.

The CMA is proposing, as part of its decision regarding possible solutions, the suggestion to evaluate Microsoft and AWS as having Strategic Market Status (SMS).

To fix the competition issues we’ve discovered, we propose that the Competition and Markets Authority (CMA) Board employs its powers for digital markets to initiate SMS investigations. Our recommendation is to consider giving strategic market status (SMS) to the two leading providers, Microsoft and AWS, in relation to their cloud services activities. This would allow the CMA to implement tailored interventions aimed at addressing our identified concerns, such as features where there’s a risk of specification around designing effective market solutions.

Should the designation be assigned, the Communications Market Authority (CMA) would have the ability to tackle particular issues regarding cloud services and implement tailored solutions instead.

Record-breaking revenue for Azure

In simpler terms, it was revealed in Microsoft’s latest financial report that their Azure cloud computing division reached an impressive $75 billion in earnings throughout their 2025 fiscal year. This past quarter, the revenue generated by Azure grew by a substantial 39%, exceeding predictions made by analysts in the industry.

This figure is remarkably significant as it represents the initial disclosure of Microsoft’s revenue figures concerning their Azure cloud computing division.

In the latest financial year quarter, Microsoft’s total revenue exceeded predictions and rose by a substantial 18%, reaching an impressive $76.4 billion.

Microsoft managed to climb up the ranks and become the world’s second company valued at $4 trillion, mirroring NVIDIA’s achievements in this area by performing exceptionally well during a robust quarter.

Interestingly, Microsoft contested the conclusions made by the CMA, yet at the same time, they characterized the cloud market as both competitive and rapidly evolving.

According to Microsoft, speaking to The Financial Times, the latest report by the CMA panel fails to hit the target once more, as it overlooks the fact that the cloud market is currently more vibrant and cutthroat than ever before. This dynamic sector is experiencing unprecedented investment, along with swift advancements driven by artificial intelligence.

In a departure from their findings, Amazon argued that the final report from the inquiry group overlooked undeniable signs of strong competition within the UK’s IT services sector. This sector has been significantly transformed by cloud computing, leading to a substantial decrease in costs and an increase in options for customers regarding choice and flexibility.

To foretell the actions that Microsoft and AWS might need to undertake, we’ll first need to find out if Azure and AWS receive the SMS (Service Model Specification) designation. Only then can we make an informed prediction.

Read More

2025-08-01 00:39