Microsoft's Azure cloud business just showed accelerated growth for the first time in years as it takes on Amazon Web Services (MSFT)

Satya Nadella

Microsoft's Azure cloud computing business grew faster this quarter than last quarter.
It's the first time Azure's quarterly revenue growth rate has increased in years.
The increase was a very modest three percentage points, but any increase is significant as industry watchers looks for indications Microsoft is gaining traction in the cloud market over dominant Amazon Web Services.
However, Microsoft still does not break out specific revenue figures for Azure.
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For the first time in years, Microsoft's cloud computing business grew faster during the company's most recent quarter than in the quarter before.

The company released fiscal second-quarter earnings on Wednesday, reported a 62 percent increase in Azure revenue growth compared to the same quarter last year. The growth rate is up from Azure's 59 percent growth rate last quarter.

While a three-percentage-point increase is very modest, it's the first increase in Azure's growth rate in many quarters and significant as the cloud computing industry watches for signs of Microsoft's growing traction.

Azure revenue has been falling consistently since after October 2017 earnings release when the company reported a 98% Azure growth rate (subsequent growth rates were 93%, 76%, 76%, 73% and finally 59% last quarter before jumping to 62% this quarter).

Even as growth slowed, Wall Street seemed unfazed. Analysts told Business Insider they chalk it up to the "law of large numbers." Basically, the bigger these platforms get, the harder it is to post the triple-digit growth figures that they did when the platforms were younger. Amazon Web Services has seen its revenue growth slow too, for largely the same reasons.

Microsoft's cloud business is closely watched, particularly after the company scored a $10 billion Pentagon cloud computing contract over AWS. The contract didn't begin within the quarter, but the most bullish analysts on Microsoft expected it to lead to business elsewhere and even said Microsoft could erode AWS market share as a result.

AWS disagrees, to say the least. The company is challenging the Pentagon's contract decision based on the premise AWS technology is so superior to Microsoft that the decision much has included political interference. Microsoft has repeatedly said it believes it won on its own merits.

Microsoft handily beat Wall Street expectations when the company released fiscal second-quarter earnings on Wednesday, reporting a $11.6 billion profit on earnings of $36.9 billion revenue.

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