Ca$htag$: Azure’s Momentum Puts Pressure on Amazon’s Cloud Dominance

here on the Schwab Network. I'm Diane King Hall alongside Tom white in our Chicago studio. Time now for our cash check segment. For that let's bring in our next guest. And as Landon Swan, co-founder of Like folio, taking a look at Amazon ahead of its quarterly results today. And I wonder if this is going to be another one of those. That's a tale of two tech giants. That's what we got today with Microsoft and Meta. Landon you got a lot of data on how Amazon looks. It's been one of the ones that's like the lag seven this year. What does your data show? At a high level, you know, what's crazy about Amazon is I think most of the story is not about, you know what Amazon what normal people think of Amazon, right? I mean amazon.com. You go to shop, you know, we've got that at I think plus 1% on a year over year basis. They're doing great. They're the world leader. I mean, they've got, I think 40, 42% margins. So it's an unbelievable business. But that's not where the story is. The story is in cloud computing and AWS. And where is that? How is that battle shaping up, especially between them and Microsoft? I think, you know, obviously you got to include Google, but the fear is that, you know, Amazon's huge lead in AWS is eroding. And maybe Microsoft can pass them. And, and I think that's the, that's the big fear for Amazon investors or the big hope for Microsoft investors. And you can see in this chart here, there is, you know, this is the, the year over year. I want to make that very clear. This is not total demand. This is how the change is happening on a year over year basis. And so, you know, if a company was had a straight line in the positive, they're growing very steadily over time. So we're charting the derivative here. But when you look at, you know, that that Azure line, that purple line, that is that, that's jumping off the charts. That is a big number plus 67% on a year over year basis. Whereas, you know, AWS is chugging along at plus 13% doing well. But, and Google's kind of kind of hanging in there, but that's the story is are they losing to Microsoft? They have, you know, there's a big contingency of, of different companies that they love AWS or they love Microsoft. And, you know, we're kind of shaking that out, but they're, they're racing. I mean, they are spending a ton of money, I think 200,000,000,000 in 2026 CapEx to build things out. You know, they, they've done what they always do when it comes to big expenses. And they've, they've created the business themselves. I mean, that started with AWS. They were paying a lot of money for servers and, and all of that. So they said, you know what? We'll build it ourselves. Maybe it can be a business. And now it's one of the biggest. They did it for delivery. They're doing it for GPUs and AI software and trainium and bedrock. And so, you know, they, they are continuing to build out what they see as their biggest expenses and turning those into revenue, which is an unbelievable strategy. And it's why they're, you know, they're the one of the largest companies in the world. So, you know, hats off to them. But again, the story is, are they losing out to Microsoft? The data that we show is that this is probably a pretty, a big catch up quarter for, for Microsoft. AWS is definitely going to be in the lead still, but I think the lead is shrinking significantly. So there is a concern there. And then, you know, when we look at what happened with Meta's report, they beat on revenue. And, you know, CapEx was raised a little bit, I think 10 billion on the bottom end and that one sold off. So if, if Amazon comes out and says we're going to spend even more on CapEx, if they raise that, how will the street react? Me personally, I think I see it as an investment. And so any negative reaction to that kind of increased spend is, is, is an opportunity in my mind. I think that's a, it's a wrong read. These are not companies that are, you know, likely to go bankrupt because they're spending too much. And that's the risk just isn't there. They have so much revenue coming in, they can figure it out. But they're basically buying future revenue with current expenses. And, and I think that's a fantastic model. So, you know, the way we see it right now, again, retail is kind of hanging in there, plus 1%. I know that Prime Day was very successful. I think it was up 9% on a year over year basis, but it's almost like that's a footnote now for the company. Everybody, all eyes are on compute and AWS. And for us, that's got them at plus 13%, on, on demand. Now that I want one more caveat, I talked about the derivative angle. One more caveat for that number is that's people talking, you know, going to those websites. And, you know, looking to sign up. And so that doesn't necessarily mean that Amazon's increase is going to be 13%. We think it's probably going to be higher than that because this doesn't really account for existing customers expanding what they got. That's very difficult for like folio to track people. Don't you know, the business managers don't usually get on social media and talk about how they're increasing their spend, but we can track new customers. So I think that, you know, Microsoft is is doing really well on new customers. AWS Amazon is doing well with existing customers and having them grow. They're both growing very quickly with existing customers. But I think that that Microsoft's cutting into the lead that could, that could be a little bit, poorly received by investors, I think. Yeah, it's funny, we used to talk about Amazon and the retail side, but you know, that makes up the bulk of their revenue. But as far as their operating profit, AWS is nearly 60%, even though they only generate about 20% of their revenue from AWS. But when you look at the growth rates at Google alphabet, 82% growth rate as far as their cloud computing side of their business, Azure 43% above both, above expectations here, they're expecting about 31% growth rate as far as AWS. If that number comes in above expectations, does that change? You know, your thinking because, you know, the amount of compute that everybody is talking about, they need Amazon already has it. They're the biggest player within cloud at this point. So would that be a surprise to you guys to see, you know, growth rates above 31%? It would not surprise me. I think that I think a lot of investors underestimate just how important, AI compute is going to be over the next year and then beyond, it's, you know, we use it incredibly, the amount of AI that we use to build out our data sets and analyze things is unbelievable. And it's growing significantly on a week over week basis. Forget quarter over quarter. I can only imagine at, you know, large companies how much it's growing. And, and we have some context, just anecdotally, we talked to and people are going all in on this because the results are so incredible. So that that taints my view a little bit as to CapEx. Again, I think that it's a great investment. I would not be surprised at plus 31% or more. And I think that that would hopefully, you know, from the investor perspective, hopefully alleviate some of the fears that they're spending too much money when they start to see some of those returns come back because again, they are building the GPUs, they're building the software that helps these companies take advantage of, of AI. And they're it's like a triple win. You get on AWS, you're paying for those services, you're paying for the, the software side of it. With bedrock, you're paying for the hardware side of Trainium. And you're just, you're just forking over money to Amazon, but your company is doing much, much better because of it. I think that as that becomes more and more apparent and hopefully with a print above, like you said above, 31% growth on AWS, I think investors are going to be relieved and say, you know what? This could be something really big. I think that it is something big. I think that's where I'm at. I don't care if they come in at 25 or 31. I know the direction that everything is heading. The pie is growing so much. There's room for Microsoft to to grow very quickly and AWS to also, you know, do extremely well. So, that that's my personal opinion. The like folio data is bullish. We're at a plus 31. On the earnings score. We think that they're going to do well on this. Everything that we've got says retail is hanging in there. AWS is growing. But there's going to be a lot of people reading between the lines on CapEx and how fast are you growing? I think it's probably going to be an over read no matter what. I think that a year from now, we're going to look back and think, you know, look at AWS size now versus what it is in a year, it's going to be a big, big difference. So I think the growth is coming. Landon. Real quick, there was a view coming into this year that Amazon was the member of the Mag seven, where we would see opportunity and more, you know, investor appetite and a lot of that. On AWS, when you look at that chart now, I know you gave the caveat that it is year over year and not necessarily capturing all like what total market share looks like, but it looks like when you look at that chart that Microsoft is lapping Amazon, is that what you think is partly what's holding? I mean, I don't even know if I could say that that's what's holding Amazon back because up until today for Microsoft, it was just you know, things were pretty bearish for Microsoft. But what do you think has been holding it back this year. Yeah, I think that's a big concern. I think. And I think it's a limited view. And I think it's an incorrect view in that people may assume that if Microsoft wins, Amazon loses. And this is not a zero sum game with compute. I mean this compute pie is going to grow exponentially over the next several years. And so even if even if Microsoft takes the lead, Amazon can be extremely profitable and have an incredible incredible opportunities to grow their business. So, you know, I'm not scared, you know, as I am an Amazon investor and I'm not scared if if Microsoft, you know, takes number, number one spot from them, I hope they don't. But I want everyone to be growing because I know that that's, that's the key. We don't want to see, you know, Google falling off of Microsoft falling off and Amazon winning because that makes you question is the pie growing? I know the pie is growing, but I want investors to understand that. And I think that's what's going to give people more confidence going into the future. The other caveat that I think that, you know, is worth a footnote is that they own, what, 15 or 20% of anthropic, which is probably the best model out there right now that that's going to IPO, maybe $1 trillion or more. So you've got 150 $200 billion in paper, paper gains or, you know, value coming in on Amazon as well. So, you know, the I think the winds are just going to keep coming for Amazon. But in the short term, investors could misread some of this. And there could be opportunity if they if CapEx goes up, Microsoft does, you know, shows that they're doing better than AWS and they sell off a little bit. I'm seeing it as an opportunity. All right. Thank you. Landon. That's Landon Swan, co-founder of