Microsoft and Amazon find themselves in the sights of the UK's Competition and Markets Authority (CMA). An investigation by the CMA looked into the cloud services market to determine if anything harms competition.
The CMA determined that "competition is not working well" and has shared recommendations to solve the situation. An independent CMA panel found the cloud services market to be “highly concentrated,” with Microsoft and AWS dominating the space and each holding up to a 40% share.
Microsoft trails AWS in terms of revenue in the cloud services market, but both companies make billions in the space and are far ahead of competitors in terms of share. The panel's report explained that other cloud providers would struggle to close the gap, partly due to the size and dominance of AWS and Microsoft's Azure.
But Microsoft is in a unique position due to its licensing practices, according to the panel:
"Microsoft’s licensing practices are adversely impacting the competitiveness of AWS and Google in the supply of cloud services, particularly in competing for customers that purchase cloud services which use the relevant Microsoft software as an input. As a result, Microsoft faces weaker competitive constraints from AWS and Google, its most significant competitors, which is reducing competition in cloud services markets."
The CMA's decision on potential remedies includes a recommendation to consider designating Microsoft and AWS with strategic market status (SMS):
"In order to remedy the harms to competition that we have found, we recommend that the CMA Board use its digital markets powers to prioritise commencing SMS investigations to consider designating the two largest providers Microsoft and AWS with strategic market status (SMS) in relation to their respective digital activities in cloud services. This would enable the CMA to impose targeted and bespoke interventions to address the concerns we have identified, including with respect to features where there are specification risks around the design of effective market interventions."
If that designation was given, the CMA could address specific concerns related to the cloud services and impose targeted interventions.
Record-breaking revenue for Azure
Microsoft's recent earning statement shared that the tech giant's Azure cloud computing unit surpassed $75 billion in revenue during the 2025 fiscal year. Azure revenue rose 39% in the most recent quarter, beating forecasts made by industry experts.
That figure is particularly noteworthy because it’s the first time Microsoft has shared revenue numbers for the Azure cloud computing unit.
Microsoft surpassed expectations for overall revenue in the most recent fiscal quarter as well. Overall revenue increased 18% to $76.4 billion.
The strong quarter helped Microsoft become the world's second $4 trillion company, following in the footsteps of NVIDIA.
Oddly, Microsoft disputed the CMA’s findings while simultaneously describing the cloud market as highly competitive and dynamic.
"The CMA panel’s most recent publication misses the mark again, ignoring that the cloud market has never been so dynamic and competitive, with record investment, and rapid, AI-driven changes," said Microsoft to The Financial Times.
Amazon took a different approach, stating, "The inquiry group’s final report disregards clear evidence of robust competition in the UK’s IT services industry, which cloud computing has revolutionised by dramatically reducing costs and expanding customer choice and flexibility."
We'll have to wait to see if Azure and AWS are designated with SMS before we can predict what steps Microsoft and AWS may be required to take.
