How do Microsoft's licensing practices, highlighted in the August 2025 UK CMA report, impact its cloud competitiveness against AWS and Google?

The August 2025 UK Competition & Markets Authority (CMA) report concluded that Microsoft's licensing practices are significantly impacting competition in the cloud computing market, particularly disadvantaging rivals like Amazon Web Services (AWS) and Google. The report found that the UK's cloud sector is "not working well," with Microsoft and AWS identified as primary contributors to reduced competition.1

Key impacts highlighted by the CMA include:

• Anti-Competitive Licensing: The CMA report specifically stated that Microsoft's licensing practices "adversely impacting the competitiveness of AWS and Google in the supply of cloud services".1 This is particularly true for customers who utilize Microsoft software as an input for their cloud services, forcing AWS and Google to incur higher costs.1
• Reduced Constraint on Microsoft: These practices weaken the competitive pressure Microsoft faces from its most significant competitors, AWS and Google, leading to less overall competition in cloud services markets.1
• Market Dominance: Microsoft's "significant market power" with certain software products was a central concern, contributing to higher costs, less choice, and reduced innovation for businesses across the UK.1 AWS and Microsoft's Azure each command up to approximately 40% of the UK cloud market, with Google trailing.1

In response to these findings, the CMA has indicated it will consider imposing "conduct requirements" and potentially designating Microsoft with "strategic market status" (SMS).1 An SMS designation would allow the CMA to implement targeted interventions to address the identified competition harms, including those related to Microsoft's cloud licensing practices.1 Microsoft has expressed disagreement with the report, asserting the cloud market is highly competitive and dynamic, while Google has welcomed the findings and urged swift action.1

This regulatory scrutiny comes amidst strong growth in Microsoft's cloud business. For instance, Azure and other cloud services reported a 38-39% constant currency growth in recent quarters, underscoring the scale and importance of this segment to the company.2 Beyond the UK, Microsoft also faces a multibillion-pound legal claim in the UK over alleged overcharging for software licenses and an inquiry by the Swiss Competition Commission into its Microsoft 365 licensing fees.3

Investigate institutional ownership changes in MSFT following the August 2025 CMA report and the subsequent May 2026 SMS investigation announcement.