The Pentagon has awarded a $10bn (£8bn) cloud-computing contract to Microsoft, following a heavily scrutinised bidding process in which Amazon had been seen as the favourite.
The 10-year contract for the Joint Enterprise Defence Infrastructure, or Jedi, is aimed at making the US defence department more technologically agile.
Amazon’s bid drew criticism from its rivals and US President Donald Trump.
The company said it was “surprised” by the decision.
A “detailed assessment purely on the comparative offerings” would “clearly lead to a different conclusion”, it said.
Amazon is said to be evaluating its options after the decision. It has 10 days to decide whether or not to launch a challenge.
In its statement, the Pentagon said all offers “were treated fairly”.
What is Jedi?
The Department of Defense wants to replace its ageing computer networks with a single cloud system.
Under the contract, Microsoft will provide artificial intelligence-based analysis and host classified military secrets among other services.
It is hoped that Jedi will give the military better access to data and the cloud from battlefields.
Is the decision controversial?
Amazon had been considered the front-runner – until President Trump began questioning whether the process was fair.
In July he told reporters that he was getting “tremendous complaints about the contract with the Pentagon and Amazon”.
He said other companies had told him that the contract “wasn’t competitively bid” and that his administration would “take a very long look” at the process.
Mr Trump has repeatedly criticised Amazon and its founder Jeff Bezos – who also owns the Washington Post newspaper – in the past.
Dan Ives, managing director and equity analyst Wedbush Securities, said he expected Amazon and others to challenge the decision in the courts, but called it a “paradigm changer” for Microsoft.
The move was likely to boost Microsoft’s share price and bring “significant positive financial implications” for the company in the coming years, he said.