Here’s how much money Google estimates Microsoft’s cloud business is actually losing
Satya Nadella, chief executive officer of Microsoft Corp., during the company’s Ignite Spotlight event in Seoul on Nov. 15, 2022.
SeongJoon Cho | Bloomberg | Getty Images
Google has for years been playing catch-up in the cloud infrastructure market, where it’s seen in the industry as a distant third in the U.S., behind Amazon and Microsoft. The challenge for investors is that the three companies don’t report cloud infrastructure metrics in a way that makes them easily comparable.
However, an internal estimate assembled by Google employees, based on a leaked Microsoft document and some extrapolation of other market statistics, suggests Google believes it’s closer to second place than analysts think.
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Google’s document estimates that Microsoft generated under $29 billion in Azure consumption revenue in the latest fiscal year, which ended June 30, reflecting the value of cloud infrastructure services used by clients. That’s several billion dollars less than what Wall Street analysts had forecast. Bank of America was the most bullish, predicting Azure would pull in $37.5 billion in fiscal 2022. Cowen predicted revenue of $33.9 billion and UBS said $32.3 billion.
The document from Google has Azure ending the 2022 fiscal year with an operating loss of almost $3 billion, down from a loss of more than $5 billion the prior year. It claims that Azure’s sales and marketing costs approached $10 billion, accounting for 34% of consumption revenue. Microsoft said sales and marketing costs for the whole company equaled 11% of revenue over the same period.
One analyst dismissed Google’s bottom-line tally.
“There’s no way it’s that big of a loss,” said Derrick Wood, an analyst at Cowen who has the equivalent of a buy rating on Microsoft stock. His research shows Azure boasting an operating margin above 30%, compared with Google’s estimate of a -10% margin.
Cloud represents one of the most high-stakes battles in technology, as the biggest and most well-capitalized U.S. tech companies try to win lucrative deals from large enterprises and government agencies, which are increasingly pushing critical computing and storage needs out of their own data centers.
Google and Microsoft have been investing heavily to keep Amazon Web Services from dominating the market the e-commerce company pioneered in 2006. But the companies aren’t completely forthcoming about their results.
Microsoft provides year-over-year growth for Azure and other cloud services but doesn’t give a dollar figure, nor does it specify how much of the growth comes just from Azure. The Azure and other cloud services metric also includes, among other things, enterprise mobility and security, or EMS, tools that can be sold separately.
Google parent Alphabet, meanwhile, doesn’t tell investors how much revenue or operating income the Google Cloud Platform, or GCP, generates. It only discloses those figures for what it calls Google Cloud, which includes subscriptions to Google Workspace collaboration software, as well as GCP, a direct Azure rival.
Amazon reports both revenue and operating income for AWS, giving investors the cleanest picture of its cloud business among the three companies. AWS recorded an operating margin of 26% in the third quarter, while Google’s cloud group reported an operating margin of -10%.
Microsoft has never laid out gross profit or operating profit for the Azure division. CEO Satya Nadella said in 2019 that customer adoption of “higher-level services” beyond raw computing and storage resources can lead to “good margins long term.”
According to data from Gartner, AWS controlled 39% of the global cloud infrastructure market in 2021, followed by Microsoft at 21%, China’s Alibaba at 9.5% and Google at 7.1%.
Representatives for Google and Microsoft declined to comment for this story.
How Google came up with its estimates
According to Google’s document, the analysis follows an Insider article, which cited a leaked Microsoft presentation that included Azure consumption revenue, or ACR, for its U.S. enterprise business in the past few years. Google said in its document that the leaked presentation allowed for a more accurate modeling of the business, and Google’s calculations suggest that ACR is the main source of revenue for Azure and other cloud services.
Google made a series of assumptions based on the leaked ACR information. It came up with a possible number for ACR abroad using Microsoft’s statement that around 51% of total revenue in fiscal 2022 derived from customers located in the U.S. Google then added in revenue from other customer segments, such as public sector and regulated industries, based on market data from Gartner and other sources.
To determine operating expenses, Google assumed that 65,000 people are dedicated to or work mainly on Azure, referring to an Insider report that said Microsoft’s Cloud and Artificial Intelligence organization had over 60,000 employees.
If Google is right, Microsoft’s ACR would be about 40% the size of Amazon’s AWS business and 27% larger than Google’s cloud business.
“Analysts include revenue allocations from EMS and Power BI, both of which are highly profitable SaaS businesses with estimated gross margins above 80%,” Google’s document says. “For a realistic analysis of Azure’s profitability these allocations have to be removed.”
Google concluded that Microsoft’s ACR growth slowed from 61% in the 2020 fiscal year to about 50% in the 2022 fiscal year. That’s faster growth than the figure Microsoft provides for all of Azure and other cloud services, which went from 56% expansion to 45% over the same period.
Google projected that Azure’s gross profit, or the revenue left after accounting for the cost of goods sold, expanded from below 29% in fiscal 2019 to almost 63% in fiscal 2022. Microsoft CFO Amy Hood has said hardware and software efficiencies helped the company widen Azure’s gross margin.
At those levels, cloud would be less profitable than Microsoft’s Windows and Office software franchises. Microsoft’s total gross margin in the 2022 fiscal year was about 68%.
None of the three U.S. market leaders announces gross margins for their cloud groups.
Cowen expects the broader Azure and other cloud services group to account for 27% of Microsoft’s revenue in the current 2023 fiscal year. He says Microsoft could clarify things by providing a more granular breakdown.
“To have a more specific disclosure on that would be helpful,” Wood said.
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The logo of multinational tech company Foxconn (also known as Hon Hai), which is a major manufacturer for Apple products, in Taipei, Taiwan, on April 16, 2025.
Anadolu | Anadolu | Getty Images
Foxconn, a key Nvidia partner in its artificial intelligence buildout, saw its revenue spike 26% year-on-year in November, as demand for servers continued to ramp up amid the AI boom.
The Taiwanese company, also known as Hon Hai, is the world’s largest contract electronics manufacturer and makes the servers that hold chips in data centers, as well as assembling Apple’s iPhone.
Foxconn on Friday reported “strong growth” year-on-year for its cloud and networking products, pointing to “momentum for AI server racks,” in its monthly revenue report. It reported revenue of NT$844.3 billion ($27 billion) for November.
A longstanding partner to many of the world’s largest tech companies including Nvidia and Apple, Foxconn has become a key player in the rollout of AI infrastructure in recent times.
It was announced in May that the company would provide infrastructure to a major AI factory in Taiwan, in collaboration with Nvidia and the Taiwanese government. Two months later Foxconn announced it was taking a stake in data center construction company TECO Electric & Machinery Co.
OpenAI said last month that it would collaborate with the Taiwanese company on design work and U.S. manufacturing readiness for next generation AI infrastructure hardware.
Foxconn’s month-on-month revenue was down around 6%, with the company pointing to its smart consumer electronics segment slightly declining.
“AI server rack shipments continue to ramp up, and ICT products are in peak season in the second half of the year,” the monthly report said in its business outlook for the fourth quarter.
The company said in November that growth in its AI server business had seen its third-quarter profits jump 17% year-on-year.
Foxconn’s share price has jumped 26% since the start of 2025, following a 76% uptick over the previous 12 months.
Yi He, co-founder of Binance, in Dubai, United Arab Emirates, on May 10, 2023.
Bloomberg | Bloomberg | Getty Images
Binance Holdings, the world’s largest cryptocurrency exchange, named a new co-CEO Wednesday in a major shake-up of its leadership structure.
Yi He, who co-founded Binance with former head Changpeng Zhao in 2017 and has children with the crypto mogul, will now split duties with acting CEO Richard Teng, who announced the news this week.
The move represents the firm’s most significant leadership change since Teng succeeded Zhao, who pleaded guilty to violating U.S. money-laundering laws in 2023.
Teng, who was appointed amid intense regulatory scrutiny of Binance and crypto more broadly, notably had a background in financial regulation and services, formerly holding a senior regulatory role at Singapore’s central bank.
“[Yi He] has been there from the start, and she has been driving a lot of changes and driving the growth of Binance,” Teng told CNBC’s Dan Murphy on Wednesday shortly after the announcement.
Yi He’s elevation to the co-CEO position represents the appointment of an insider with longstanding ties to Zhao, also known as CZ.
The move comes after U.S. President Donald Trump pardoned CZ, who had previously pleaded guilty to enabling money laundering while heading the cryptocurrency exchange.
The Trump administration has taken a friendlier stance toward the crypto industry, with several high-profile cases dropped in recent months.
Queen behind the scenes
Yi He has maintained a relatively low public profile compared to CZ, with many details regarding her roles and activities at Binance unclear.
Her social profiles list her most recent position as Chief Customer Service Officer at the crypto exchange.
One of the last major public statements from the businesswoman was in defense of CZ during his 2024 trial, among 161 letters requesting leniency from the court.
In her letter written in Chinese, Yi He identified herself as CZ’s business partner and “the mother of his three children.”
She claimed that she met CZ at a public blockchain event in 2014, three years before Binance was founded. She was then working at cryptocurrency exchange OKCoin and recruited CZ to join her.
“As CZ’s life partner, I’ve known him for nearly ten years, so I understand a side of him that’s often overlooked,” she wrote in the 2024 letter defending him.
Binance said in a statement Wednesday that Yi He has “played a fundamental role in shaping Binance’s vision and culture, guiding a strategy focused on users’ needs and innovation.”
The company also included a public statement from Yi He, in which she emphasized her and Teng’s “complementary perspectives and shared vision.”
“Together, we bring diverse perspectives and are confident in leading the future of the industry during this pivotal time, as we responsibly expand our global presence and drive sustainable innovation with our users always at the center,” she said.
Federal probes into Binance have also referenced her role in the company. In 2020, U.S. prosecutors reportedly sought records of communications involving Yi He and other executives related to anti-money laundering compliance and the creation of Binance’s U.S. entity.
Media reports have previously painted Yi He as a “Crypto Queen” wielding massive sway behind the scenes at Binance.
According to a report from the Wall Street Journal in 2023, Yi He was a former Chinese talk-show host before joining OKCoin, and she entered a relationship with CZ while working together in Shanghai.
The report added that He would assume sweeping control over the crypto giant’s marketing and investment divisions.
Binance and Yi He did not immediately respond to CNBC’s request for comment.
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