Mixed fortunes for Microsoft cloud business

posted in: Cloud/SAAS | 0

By:  Jamie Davies

Microsoft has reported mixed fortunes for its cloud business unit during its quarterly earnings call, as while cloud revenues grew across the board, the results are slightly down on the previous quarter.

Office commercial products and cloud services revenue grew 7%, Office consumer products and cloud services revenue grew 6% and Dynamics products and cloud services revenue grew 9%. Revenue in Intelligent Cloud grew 3% to $6.1 billion, with Azure revenue up 120%, though this is down from 5% and 140% respectively in the previous quarter. Despite the slight slow-down, the team remain upbeat for future business. Profits for the Intelligent Cloud business unit fell 14% to $2.19 billion for the quarter.

“We exceeded $10 billion in commercial cloud annualized revenue run rate,” said Satya Nadella, CEO at Microsoft. “We’re halfway to our FY 2018 goal of $20 billion. This quarter, we surpassed 270 million monthly active devices running Windows 10. We’re proud of our progress and look forward to making more as enterprise deployments accelerate.

“We’re expanding into new markets such as security, analytics and cloud voice, where we see an opportunity and where we can differentiate. For example, the cyber security market is expanding rapidly, and it’s a place where we have unique capabilities, like Advanced Threat Protection, Cloud App Security and Advanced eDiscovery. This combination drove a 35% quarter-over-quarter growth of monthly active users of our premium information protection services in Office 365. A key driver of this growth is our new premium Office 365 suite, E5.”

While the figures show revenues slowing slightly, the company has still demonstrated growth in the cloud computing segment and overall consensus throughout the industry would generally attribute Microsoft as the number two player in the market. Share price took a slight dip following the news, however Nadella leadership and guidance into new markets has seen positive growth in market performance since his appointment in 2014. Share price has increased from just below $40 to roughly $55 during Nadella’ tenure as CEO.

“The cloud is being built into every organization’s quest to optimize and grow,” said Nadella. “With our results this quarter, it remains clear we are one of the two leaders in this market. Azure revenue increased 120% in constant currency, with revenue from premium services growing triple digits for the seventh consecutive quarter. We are innovating in new areas to help organizations digitally transform. We’re expanding our competitive strength in hybrid computing. We’re generating opportunity for developers and partners.”

In terms of moving forward, the company has prioritized the hybrid cloud market as a means of growth. By utilizing the Azure Stack offering, Microsoft claims customers are able to process certain workloads in Azure data centres, while also keeping mission critical workloads in-house on the Azure Stack itself. The company believes the scale of the data centre and Azure Stack offering is number one in the industry.

“That I think is where the world is going to go to, where distributed computing will remain distributers,” said Nadella. “So Azure’s stack is completely unique to Microsoft. No one else who is in the public cloud business at any scale has that kind of capability. So I would say that’s another point of differentiation.”