Cramer: $10B Pentagon Contract Validates Microsoft's Cloud Business

The Department of Defense's choice of Microsoft Corporation MSFT as its cloud platform provider signals to the market that its cloud business is "just as good" as Amazon.com, Inc. AMZN, according to CNBC's Jim Cramer.

What Happened

Microsoft and Amazon were the final contenders for a 10-year, $10-billion Joint Enterprise Defense Infrastructure deal (JEDI) contract with the federal government.

Microsoft's ultimate win should be seen as the "best possible validation they could get", as it confirms that Microsoft's Azure business is "at least close enough for government work," Cramer said on Monday's "Mad Money."

Losing out on the contract is not a major blow for Amazon Web Services, as it remains the clear No. 1 cloud infrastructure provider, Cramer said.

AWS reported revenue of $9 billion in its latest quarter alone, so no one is "weeping over losing" $10 billion over a decade, he said. 

Why It's Important

Reports that President Donald Trump instructed ex-Secretary of Defense James Mattis to "screw Amazon" out of the deal may have played some role in the outcome, Cramer said.

Microsoft's cloud business stood on its own and can fulfill the task, he said. 

"We already know Microsoft was firing on all cylinders," the CNBC host said. "This JEDI contract simply confirms it."

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What's Next

Amazon's loss to rival Microsoft signals it "won't be able to monopolize" all of the government's cloud-related needs, Cramer said.

Smaller cloud players like Microsoft, IBM IBM and Alphabet Inc GOOG GOOGL "have more of a chance to win business," he said. 

"As for Amazon, losing this business is no skin off their back," Cramer concluded.

"The real issue is that they've spent so heavily to grow the business, and while I'm OK with that, it might give you more opportunities to buy the stock into weakness down the road because of Wall Street's inherent shortsightedness."

Amazon shares were down 1.05% at the time of publication, while Microsoft shares were falling by 0.6%. 

Related Links:

Report: Amazon Could Challenge Microsoft's Pentagon Contract Award

Cloud Competitors: How Amazon Web Services, Microsoft Azure's Quarterly Performance Stacks Up

Photo by Coolcaesar via Wikimedia.