What Wall Street Expects from The Q3 Cloud and Infrastructure Scorecard: Microsoft Vs. Amazon
Azure and AWS both accelerated last quarter, and Wall Street is now betting on which cloud giant can prove its record AI spending is turning into real revenue before the other one blinks.
Microsoft (NASDAQ:MSFT | MSFT Price Prediction) and Amazon (NASDAQ:AMZN) run the two biggest public clouds, and both clouds grew faster last quarter. Azure grew 43% in Microsoft’s fiscal fourth quarter. AWS grew 37%, its fastest pace in 18 quarters. Both report their September quarters soon, and Wall Street wants proof that record AI spending is still turning into revenue.
Copilot Drives Azure While Custom Chips Drive AWS
Microsoft’s growth came from software built on top of its own infrastructure. Microsoft 365 Copilot has passed 30 million paid seats. GitHub Copilot revenue grew over 60% quarter-over-quarter after Microsoft switched it to usage-based billing. That switch matters because customers now pay for how much they use, on top of a flat seat fee. Chief financial officer Amy Hood said efficiency gains get “quickly monetized in quarter” because demand still exceeds supply.
Amazon’s story was about chips. Its AI and chips businesses each passed $25 billion annualized run rates. 98% of its top 1,000 EC2 customers use its Graviton processors. Chief executive Andy Jassy sees “a real chance” that Amazon will sell its Trainium AI chips to data centers outside its own cloud. Retail helps too: advertising revenue rose 26%, giving Amazon a high-margin stream that offsets some of its heavy spending.
| Q3 Scorecard | Microsoft | Amazon |
|---|---|---|
| Consensus EPS | $4.7234 | $1.9560 |
| Consensus revenue | $90.69 billion | $202.11 billion |
| Company revenue guidance | $89.85 billion to $90.95 billion | $197 billion to $202 billion |
| Cloud backlog | $678 billion commercial RPO | $496 billion AWS backlog |
Huge Backlogs, Very Different Cash Stories
Microsoft’s commercial remaining performance obligations, or contracted future revenue, rose 84%. Without OpenAI, growth was 25%, a reminder of how much depends on one customer. Free cash flow fell 23.2% to $19.64 billion. Even so, management expects free cash flow to stay positive in fiscal 2027.
Amazon’s cash position is tighter. Free cash flow over the trailing 12 months was negative $7.6 billion after $54.21 billion of capital spending in a single quarter. Jassy cited timing and warned of “free cash flow headwinds until these data centers come online”. Amazon’s headline EPS of $5.75 also included a $53.4 billion one-time gain linked mostly to its Anthropic stake, so I discount that number.
Azure’s 45% Target Is Wall Street’s First Checkpoint
Analysts have been raising their estimates. Microsoft’s EPS consensus for the September quarter rose from $4.6232 three months ago to $4.7234, with 17 higher revisions in 30 days. Management guided Azure to roughly 45% growth in constant currency. Amazon is expected to report on October 29. The consensus revenue estimate sits above the top of Amazon’s own guidance, which sets a high bar. Prime Day moving into Q2 also makes the comparison harder. I will be watching whether AWS growth speeds up for a sixth straight quarter.
Microsoft’s Margin Edge Versus Amazon’s Upside Potential
Microsoft’s operating margin of 46.8% is far above Amazon’s 11.2%. Microsoft also trades at 29 times earnings, compared with 35 for Amazon. That gives Microsoft more room for error if AI pricing moderates. So far this year, Microsoft shares are up 10.09% and Amazon’s are up 8.31%. Amazon has bigger swings alongside more potential upside. Jassy believes AWS could eventually become “a trillion dollar annual revenue business”. My view would change if AWS keeps its 39% operating margin and Amazon’s free cash flow turns positive.
Contact [email protected] for any questions or corrections.
Alex Sirois is a financial writer with experience spanning both retail and institutional investing. He has written for InvestorPlace and held roles at BNY Mellon and Bernstein, giving him a perspective that bridges Main Street portfolios and Wall Street analysis.
Alex holds an MBA from George Washington University and has built his career across multiple industries, including e-commerce, education, and translation — a breadth of experience that informs how he breaks down complex financial topics for everyday investors. His writing is conversational, actionable, and grounded in long-term, buy-and-hold investing principles.
At 247 Wall St., Alex focuses on delivering analysis that is both accessible and useful, with a clear emphasis on helping readers make more informed decisions with their money.
