M+E Daily

Strong Azure Results Boost Microsoft’s Q4

Microsoft reported stronger results for its fourth quarter (ended June 30) that it said were helped by growth in its Azure cloud computing business.

Revenue in Microsoft’s overall Intelligent Cloud business grew 23% from a year earlier, to $9.6 billion, the company said July 19. Within that business, server products and cloud services revenue increased 26%, “driven by Azure revenue growth of 89%,” it said in an earnings news release.

“Azure is the only hyper scale cloud that extends to the edge – across identity, data, app platform, security and management – and our differentiated architectural approach drove another quarter of strong growth,” Microsoft CEO Satya Nadella said on an earnings call.

Microsoft is “investing aggressively to build Azure as the world’s computer” and the company expanded its global datacenter footprint to 54 regions – “more than any other cloud provider – and with the most comprehensive compliance coverage in the industry,” he told analysts.

The company also “added nearly 500 new Azure capabilities in the last year alone focused on both existing workloads and new workloads,” including the Internet of Things (IoT) and artificial intelligence (AI) “at the edge,” he said.

Microsoft is also “already seeing strong customer demand” for its recently introduced Azure Stack and Azure Sphere “cloud-to-edge solutions,” he said.

Nadella also pointed to the major client win that his company achieved recently when Walmart selected Microsoft as its preferred and strategic cloud provider. Walmart was already using Microsoft services for critical applications and workloads. But the companies said July 16 that Walmart was “embarking on a broad set of cloud innovation projects that leverage” machine learning, AI and data platform solutions “for a wide range of external customer-facing services and internal business applications.”

Using Azure and Microsoft 365 subscription services will enable Walmart to “accelerate its digital transformation for their associates and customers,” Nadella said on the call.

During the Q&A, he said Azure usage “continues to drive a lot” of Infrastructure-as-a-Service (IaaS) “growth for us as people are sort of looking basically to lift and shift a lot of their current data center workloads.”

He added: “On top of it, we even have modernization of apps that is accelerating, and that drives a lot of the higher-level services, in particular our data services as well as our AI services… AI services are essentially compute. But what happens is all this compute then requires storage and data, and that’s another place where we see increasing acceleration.”

Total Microsoft Q4 revenue grew 17% from a year earlier, to $30.1 billion, while profit increased to $8.9 billion ($1.14 a share) from $8.1 billion ($1.03 a share).

Gaming revenue increased 39%, including Xbox software and services revenue growth of 36% thanks mainly to “third party title strength,” Microsoft said. Xbox Live monthly active users increased 8% to 57 million, CFO Amy Hood said on the call.

The company surpassed $10 billion in annual gaming revenue for the first time, Nadella pointed out. He added: “We are investing aggressively in content, community and cloud services across every endpoint to expand usage and deepen engagement with gamers. The combination of Xbox Live, Game Pass subscriptions and Mixer are driving record levels of growth and engagement. Not only are we investing to grow organically – but we are also investing inorganically in opportunities that expand our total addressable market and accrue value to our platforms and customers.”