Amazon Web Services is 'evaluating options' after Microsoft wins $10 billion JEDI contract out from under its nose (AMZN, MSFT)

Andy Jassy, CEO of Amazon Web Services, or AWS, the retail giant's cloud-computing business.

  • Microsoft was officially awarded the $10 billion JEDI cloud contract with the Pentagon on Friday — marking a big victory over Amazon, believed to be the frontrunner.
  • Amazon Web Services, the Seattle-based company’s multibillion-dollar business, is dominant in the market. AWS is “still evaluating options” after the decision, according to a source close to the situation.
  • It’s a big loss for AWS, which drives profit for the entire Amazon empire.
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Amazon Web Services is “still evaluating options” after the Department of Defense selected Microsoft for a $10 billion contract to move the agency’s database to the cloud, according to a source close to the situation.

“We’re surprised about this conclusion,” an AWS spokesperson said in a statement. “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.”

This contract – known as the Joint Enterprise Defense Infrastructure, or JEDI, contract – is a 10-year contract to move the Department of Defense’s database to the cloud. 

It’s a big loss for AWS, which drives the majority of the profit for the entire Amazon empire — and a surprise, given that AWS was the favorite to win by most industry-watchers.

It was not immediately clear what Amazon’s options might be after losing the contract. The bidding process for JEDI began more than one year ago, contenders like Oracle and IBM were eliminated from the process in April. Oracle previously launched an ultimately-failed lawsuit alleging that the JEDI contract selection process was “riddled with improprieties.” 

One potential course of action available to Amazon might be to protest the decision through a “request for reconsideration” with the Government Accountability Office. 

Wedbush Securities analyst Dan Ives said in a note to clients that his firm “fully” expects Amazon “and others” to challenge the decision in court. It’s unclear at this time how a legal challenge might work.

Amazon reported a less-than-expected profit in its third-quarter earnings on Thursday — $4.23 a share on revenue of $70 billion. AWS raked in $9 billion in revenue for the quarter and was responsible for nearly 72% of Amazon’s total operating income over the period.

Amazon Web Services still leads the cloud market and posted $2.3 billion more in sales growth over the past quarter than it did in the same period of 2018.

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