Jefferies analysts see Microsoft (NASDAQ:MSFT) Azure gaining ground on Amazon (NASDAQ:AMZN) Web Services (AWS) in the ongoing cloud computing battle.
Their cloud spending survey of 40 U.S. CIOs reveals a growing focus on cloud adoption and a slight preference for Azure.
A "big jump in spend intentions" is a key takeaway, according to Jefferies. Significantly more CIOs (43%) expect cloud spending to increase by over 10% in 2024 compared to 2023 (28%).
This trend aligns with a decisive shift towards cloud workloads. The survey found that 58% of CIOs anticipate having more than half of their workloads in the cloud by the end of 2025, up from 36% currently.
Jefferies highlights a potential driver for this growth: Artificial Intelligence (AI). "AI is a material driver of increased cloud spend," the firm states, with 54% of respondents citing AI initiatives as a major reason for their rising cloud expenditures.
The survey results also suggest a shift in cloud provider preference. While both AWS and Azure remain dominant, Microsoft's offering appears to be gaining traction.
Jefferies reports, "MSFT Azure edged out AMZN AWS in this period's survey sample." Currently, 45% of respondents identify Azure as their primary cloud provider, compared to 43% for AWS.
This marks a reversal from Jefferies' December 2023 survey, where AWS held the lead.
Looking ahead, Jefferies says spending intentions favor Azure slightly, with cloud spend intentions slightly higher for Azure than AWS.
While acknowledging the ongoing importance of cost optimization, Jefferies views the survey results positively for cloud vendors as it "indicates that the bulk of revenue headwinds to Cloud vendors may be behind."