Microsoft Wins $10 billion JEDI defense contract, beating out Amazon Web Services
The JEDI contract is worth up to $10 billion over 10 years.
IBM and Oracle are among the companies that also sought the contract but were ruled out.
Amazon has been a repeated target for President Trump, who announced in July that
U.S. Defense Department said on Friday Microsoft beat out market leader Amazon Web Services, The contract could be worth as much as $10 billion over a decade, according to a statement.
Microsoft stock rose as much as 3% in extended trading after the announcement, and Amazon stock dipped less than 1%.
This highlights the emergence of Microsoft’s Azure cloud as a challenger to AWS and represents the latest victory for Satya Nadella, who took over from Steve Ballmer as Microsoft chief in 2014.
Microsoft has also won major cloud-infrastructure deals from companies like Walmart even as AWS has kept growing.
The Joint Enterprise Defense Infrastructure deal, known by the acronym JEDI, ends up being worth $10 billion, it would likely be a bigger deal to Microsoft than it would have been to Amazon as Azure has a smaller share of the market than Amazon, which received $9 billion in revenue from AWS in the third quarter.
Early in the process Amazon was seen as the favorite, partly because its AWS business won a deal with the CIA in 2013. Also Amazon had been certified at the highest existing security clearance level, while Microsoft sought to catch up.
Other, smaller cloud rivals like IBM and Oracle were kicked out earlier in the process, which has been contentious and delayed.
In August, Defense Secretary Mark Esper said that he would look at it. Then, earlier this week, the Pentagon said that Esper had removed himself from the process because his son Luke Esper works at IBM.
Wedbush analyst Dan Ives called the deal a “game changer” for Microsoft, writing in a note to clients that the deal “will have a ripple effect for the company’s cloud business for years to come.” He also said that he expects Amazon to challenge the outcome in court, but for Microsoft to prevail.
Nadella once ran the Azure business, among other responsibilities in his 27-year career at Microsoft. He has made cloud a bigger piece of Microsoft while decreasing the emphasis on Windows. The company has also embraced Linux, and after Nadella joined, the cloud was renamed from Windows Azure to Microsoft Azure, reflecting that it’s possible to run Linux in Microsoft’s public cloud.
“We’re surprised about this conclusion,” an AWS spokesperson told CNBC in an email. “AWS is the clear leader in cloud computing, and a detailed assessment purely on the comparative offerings clearly lead to a different conclusion. We remain deeply committed to continuing to innovate for the new digital battlefield where security, efficiency, resiliency, and scalability of resources can be the difference between success and failure.”
Microsoft didn’t immediately return a request for comment.