The ever-evolving technology sector has been seeing a number of new trends over the past couple of years. Of these, the most promising is cloud computing.

Research firm IDC expects that public IT cloud services spending will surge 124.4% from $56.6 billion in 2014 to over $127 billion in 2018, resulting in a stage of “critical innovation.”

According to Joe Weinman, Senior Vice President at Telx and author of Cloudonomics, the growth of the cloud is “creating wealth for those who exploit it, and leading to the demise of those who don't.”

This can be seen clearly in the cloud stories of tech giants like Amazon (AMZN –Analyst Report) and Microsoft (MSFT – Analyst Report) that are expanding beyond their core businesses.

Amazon's Cloud Rising

For Amazon, growth and profits are more often than not mutually exclusive terms, but not in its cloud business. The proof is in its second-quarter results.

Amazon swung to a 19 cent profit in the quarter, blowing past the Zacks Consensus Estimate of a loss of 15 cents.

The biggest reason was AWS. Its revenue share increased by a percentage point, operating profit margin expanded 1,377 bps year over year and operating profit dollars skyrocketed 407.8% (314% ex-Fx). Accounting for just 8% of revenues, AWS contributed more than 36% of profit.

We expect Amazon to double down on AWS (if it hasn't already), while at the same time expanding its business internationally. The resultant pressure on profits is also likely to continue, in our view.

Satya Nadella's Microsoft Not Far Behind

Microsoft reported fourth-quarter fiscal 2015 earnings, excluding restructuring charges of 65 cents, which surpassed the Zacks Consensus Estimate of 56 cents.

Shares slumped 4.5% in after-hours trading, a combined effect of weakness in the Windows business and the Nokia write-off that significantly impacted GAAP results.

Disheartened? Don't be. Take a look at its cloud business.