Please ensure Javascript is enabled for purposes of website accessibility

Microsoft Guns for Twilio's Business With Launch of Azure Communication Services

By Nicholas Rossolillo – Sep 22, 2020 at 6:55PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The cloud computing battle is heating up and toes are being stepped on.

Microsoft (MSFT -0.59%) is continuously upping its game in the public cloud arena, and recently announced the availability of Azure Communications Services. The new product is a library of APIs (an API is an application programming interface, a pre-defined operation that can be inserted into and executed by an app) for developers to embed communications capabilities into an organizations' operations or web and mobile apps -- everything from video to chat to traditional phone calls.  

2020 has presented many businesses with unique challenges, like keeping a suddenly remote workforce productive and staying in touch with customers while physical locations are closed. Cloud-based communications are helping solve those problems, and the sprawling Microsoft Azure ecosystem is well-suited for the task. But there's one problem: It stomps on the toes of cloud-communication API pioneer Twilio (TWLO -2.18%)

Four people standing against a wall using smartphones.

Image source: Getty Images.

The cloud war heats up

Tech outfits like Twilio that help customers navigate this new digital era are going gangbusters. Twilio itself reported a 51% year-over-year increase in revenue to $765 million through the first half of 2020 as users scrambled to embed communication and identification management into their applications. Total users of the library of APIs reached 200,000 at the end of June. However, not itself a public cloud operator, Twilio and other companies like it rely on integration with Microsoft Azure, Amazon's (AMZN -1.63%) Amazon Web Services, and Alphabet's (GOOGL -0.90%) (GOOG -0.84%) Google Cloud to maximize the number of customers they can reach.

But Twilio and other cloud software businesses find themselves increasingly competing with the very public cloud providers they integrate with. Azure Communication Services is but another example of this, as the myriad of players in the fast-growing cloud industry start to encroach on each other's turf. For Microsoft, adding communication APIs alone to its long list of capabilities isn't going to move the needle. It generated $143 billion in revenue over the last trailing 12-month stretch. But for far smaller Twilio? Azure's new tricks could eat into its longer-term growth story.  

That's only an eventual problem, though. Twilio remains firmly established as the leader in the cloud communications market, and in the near term, Microsoft's competing service could simply validate the trend the API pioneer helped start in the first place.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Nicholas Rossolillo owns shares of Alphabet (C shares), Microsoft, and Twilio. His clients may own shares of the companies mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Microsoft, and Twilio and recommends the following options: long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, short January 2022 $1940 calls on Amazon, and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Microsoft Stock Quote
Microsoft
MSFT
$240.33 (-0.59%) $-1.43
Twilio Stock Quote
Twilio
TWLO
$45.75 (-2.18%) $-1.02
Alphabet (A shares) Stock Quote
Alphabet (A shares)
GOOGL
$95.19 (-0.90%) $0.86
Amazon Stock Quote
Amazon
AMZN
$92.42 (-1.63%) $-1.53
Alphabet (C shares) Stock Quote
Alphabet (C shares)
GOOG
$95.44 (-0.84%) $0.81

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
349%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.