A judge temporally blocked Microsoft’s (MSFT) - Get Report Jedi contract with the Department of Defense, according to press reports. This could mean one revenue stream is stripped away from Microsoft.
There are not yet any public filings of the court document. Amazon (AMZN) - Get Report and Microsoft were clear front-runners to win the contract and are in an intense battle for first place in the cloud services market share globally. The government cloud market is expected to add to the total cloud market.
Microsoft shares fell 0.75% to $183.33 Thursday afternoon. Amazon shares fell 0.023% to $2,159 as the broader U.S. market seesawed all day.
Microsoft signed the contract in late October.
The Department of Defense had agreed to pay $1 billion to Microsoft annually over the next 10 years for the cloud services. That annual revenue stream represents far less than 1% of Microsoft’s total expected revenue for 2020 of $142.5 billion.
But that doesn’t mean a no-deal for Microsoft is immaterial to its earnings potential. Analyst at Wedbush Securities Dan Ives said in late October that “this is a game changer deal for Microsoft to win as [JEDI] will have a ripple effect for the company’s claus business for years to come and speaks to a new chapter of Redmond winning in the cloud versus Amazon.”
Amazon has been gunning for the contract even after it went to Microsoft, which certainly doesn’t want to lose out on its potential to take market share in government cloud services.
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