"We are proud that we are an integral partner in DoD's overall mission cloud strategy", said Toni Townes-Whitley, Microsoft's president of U.S. Regulated Industries, in a statement. Before then, Amazon was widely considered to be a front-runner.
Meantime, Microsoft employees have protested involvement in the contract, known as the Joint Enterprise Defense Infrastructure, or JEDI, meant to bring USA military technology into the modern era.
"We are disheartened that Microsoft accepted the JEDI contract", a group of employees wrote on Twitter.
The Pentagon, the headquarters of the U.S. Department of Defense.
Shares rallied as much as 3.5 percent to a high of $145.67 apiece before paring their gains.
Microsoft has said it will continue to pursue government and military work, despite objections from some employees.
Early in the process Amazon was seen as the favorite, partly because its AWS business won a deal with the Central Intelligence Agency in 2013.More news: NY is 'splitting' ventilators and converting anesthesia machines for coronavirus patients
"This is a paradigm changer for Microsoft", said Daniel Ives, an analyst at Wedbush Securities who has a "buy" rating on Microsoft. Now, having had a weekend to digest the news, where do things stand for Microsoft, AWS, and the rest of the cloud compute space? The Amazon-owned cloud outfit was understandably upset and a bit shocked that it wasn't on the winning end.
"Amazon and Microsoft...know what the criteria are against which they were being evaluated", said Professional Services Council President and CEO David Berteau on an October 28 call with reporters. "This adds $10 to the stock in my opinion".
"Still, a win is a win and this is a huge one which should further push Azure as the favorite of the US Government and with Gates again passing Bezos as the world's richest man it also showcases Nadella's strategy of staying close to his firm's competencies as the better one long term".
For over a year, the acrimonious contract award process for the Joint Enterprise Defense Infrastructure (JEDI) contract set off a showdown among Amazon, Microsoft Corp., Oracle Corp. and IBM Corp. and involved conflict of interest allegations, legal challenges and intense lobbying. But politics entered the picture. Trump has always been at odds with Amazon's Chief Executive Officer Jeff Bezos. Amazon could also go to the US Court of Federal Claims, which could allow it to strengthen its case through discovery. "AWS is the clear leader in cloud computing, and a detailed assessment purely on the comparative offerings clearly lead to a different conclusion", the company said in a statement on Saturday. "We remain deeply committed to continuing to innovate for the new digital battlefield".
He was referring to complaints conservative have made recently about a $10 billion winner-take-all cloud computing contract.
"For over 40 years, Microsoft has delivered innovative, proven and secure technologies to the US Department of Defense (DoD)".
A new book by Guy Snodgrass, a speechwriter to former Defense Secretary Jim Mattis, alleges that Trump, in the summer of 2018, told Mattis to "screw Amazon" and lock it out of the bid. Mattis declined to do that, according to the book.More news: Coronavirus: Ronaldo criticised for taking pictures by the pool during pandemic
The next step for AWS is to request a debriefing from the Department of Defense to explain the decision.
In a statement released later Friday night, the Defense Department said that "the acquisition process was conducted in accordance with applicable laws and regulations".
It was against this backdrop that Trump announced in July - just as the Pentagon was reportedly prepared to announce a decision on the JEDI contract - that he was looking "very seriously" at intervening in the contracting process because unnamed people had told him "it wasn't competitively bid".
Through JEDI, the Pentagon is aiming to unify cloud services and connect data sharing between multiple branches of the military. For Microsoft, JEDI is "a powerful hunting license, not a guarantee" of dominating the DOD cloud market.
The expected date of completion for this particular project is October 24, 2029.
Bloomberg's Naomi Nix, John Harney and Amy Thomson contributed.More news: Rapid increase in coronavirus cases aboard United States aircraft carrier