Microsoft Turns to AWS to Lease Capacity; Bernstein Says Demand Growth May Be Stronger Than Expected
Claire Weston
Microsoft is reportedly leasing capacity from rival Amazon AWS to support GitHub, a move Bernstein says reveals cloud constraints spreading from GPUs to traditional CPU workloads and data-center space — but demand growth may be stronger than investors expect.
Why is Microsoft renting servers from a competitor?
Bernstein's June 17 report says Microsoft appears set to lease capacity from Amazon AWS, specifically to support GitHub.
This means → Microsoft's own data centers are running short. The bottleneck has spread from AI-training GPUs to traditional CPU workloads and physical data-center space.
Microsoft began building generative-AI capacity in 2019, but data centers take years to construct. Over the past 12–18 months, it started leasing server-equipped capacity from neoclouds — smaller, newer cloud providers.
How fast is GitHub usage actually growing?
Bernstein cites GitHub's Kyle Daigle, who posted on April 3 that GitHub saw 1 billion code commits in 2025 and now runs at 275 million per week.
In plain terms = at a linear pace, that projects to 14 billion commits this year — but Daigle himself said growth will not stay merely linear.
This reflects the surge driven by AI coding tools like GitHub Copilot. Yet on the infrastructure side, the pressure lands mostly on traditional CPU workloads, not GPUs.
What else is squeezing Azure capacity?
Office 365 Copilot paid seats grew 33% quarter-over-quarter last quarter, and Bernstein expects each of the next three quarters to add even more seats.
This means → Copilot keeps consuming capacity that could otherwise serve Azure's external customers — an internal resource contest.
In plain terms = Microsoft's own products are so hot that they are crowding out the cloud space it can sell to outside clients.
Is this good news or bad news for investors?
In the short term, the capacity constraint is worrying investors — Microsoft keeps raising capital expenditure to serve multiple product lines.
But Bernstein argues that Office 365 Copilot seats up 33% and GitHub usage surging point to future growth stronger than investors expect.
The report notes Microsoft's capex growth rate has just begun to trail Azure revenue growth; unless demand accelerates sharply, that trend should hold. This means → the return on each dollar spent is improving.
What are the ratings and valuations for Microsoft and Oracle?
Bernstein maintains an outperform rating on Microsoft with a $646 price target. As of June 16, Microsoft closed at $393.83, implying adjusted P/E ratios of 28.9× / 23.4× / 20.6× for 2025–2027.
Bernstein also maintains an outperform rating on Oracle with a $325 price target. As of June 16, Oracle closed at $188.33, implying adjusted P/E ratios of 24.7× / 22.0× / 14.6× for 2025–2027.
The report says Oracle's not winning this particular Microsoft contract is neither a problem nor a sign of limited capability; Oracle's faster response time and ability to add capacity remain surprising, and spreading its limited resources more broadly may actually be more advantageous.
Content is for reference only, not financial advice.