Microsoft's Azure is growing faster than Amazon's AWS, and at a lower valuation, making it the more attractive choice for investors betting on cloud AI returns.

What happened: Microsoft's Azure revenue grew 40% year over year in its fiscal third quarter (ended March 31, 2026), outpacing AWS's 28% growth in the first quarter of 2026. Microsoft's total cloud revenue reached $54.5 billion（約8.7兆円）, up 29%, while its AI business hit a $37 billion（約5.9兆円） annual run rate, up 123%. Amazon's AWS produced $14.2 billion（約2.3兆円） in operating income in Q1, close to 60% of total operating profit.

Why it matters: Both companies are investing heavily—Microsoft expects about $190 billion（約30兆円） in capital expenditures this year (up 61%), and Amazon expects about $200 billion（約32兆円）—to capture AI demand through their cloud platforms. Microsoft maintains a 46.3% operating margin despite heavy spending, and returned $10.2 billion（約1.6兆円） through dividends and buybacks in the quarter, whereas Amazon's free cash flow has dropped to about $1 billion（約1600億円） over the past year, from nearly $26 billion（約4.2兆円）. Microsoft trades at about 23 times earnings versus Amazon's 29, offering better value relative to growth.

What to watch: Microsoft's CFO said the company expects Azure growth to show 'modest acceleration in the second half of the calendar year compared with the first half.' Both companies face a key test: demonstrating an attractive return on invested capital from their massive AI spending in the coming years. AWS's signed-contract backlog reached $364 billion（約58兆円）, even before a recent Anthropic deal worth more than $100 billion（約16兆円）.