According to the smart finance and economics APP, in the battle for dominance in the intelligent cloud platform, Microsoft (MSFT.US) is one of the few technology giants. Analysts from Morgan Stanley, led by Sanjit Singh, stated in a report, "For cloud data warehouse vendors including Snowflake and Microsoft, interoperability brings both opportunities and risks." "While investors focus on the storage layer, we see the impact on the data transformation and querying layer, which accounts for the majority of expenses."

Intelligent cloud refers to cloud applications built using artificial intelligence or enhanced functionality. Microsoft, Snowflake (SNOW.US), AWS (AMZN.US), Google Cloud (GOOGL.US), and others have surpassed the first generation cloud technology of the past decade. Morgan Stanley estimates that intelligent cloud will create a $133 billion opportunity, but the path and speed of adoption remain uncertain.

Singh said, "While these customers are committed to building a more interoperable data stack, the range of possible outcomes is still wide as all of these customers are still in the early stages of assessing the next steps."

He added, "What is clear to us is that, while the outcomes are uncertain, we need to focus more not just on the storage layer that accounts for 10% of existing cloud data warehouse spending (given the availability of Snowflake's iceberg tables, this is still the focus of investors' attention), but also on the ETL/ELT layer that accounts for 25% of existing cloud data warehouse spending, and ultimately on the query engine layer that accounts for 65% of existing cloud data warehouse spending, which makes up the compute revenue and may also be impacted in the transformation."

Microsoft's intelligent cloud is one of the fastest-growing segments of the company. In fiscal year 2023, intelligent cloud achieved $87.9 billion in revenue, a year-on-year increase of 17%. In the fourth quarter of fiscal year 2024, intelligent cloud revenue was $28.5 billion, an increase of nearly 20% compared to the same period last year. Total spending on intelligent cloud for the entire fiscal year 2024 was $105.3 billion, a year-on-year increase of 19%.

However, looking ahead to the first quarter of fiscal year 2025, Microsoft has lowered its sales forecast for the intelligent cloud segment to $23.8 billion to $24.1 billion. The company expects this submarket to rise again in the second half of fiscal year 2025.