Microsoft sales jump 2% to $52.7 bn as it gains share from AWS

Microsoft reported revenue of $52.7 billion (+2 percent) in December quarter of 2022 as its Azure Cloud business has gained more share from rival Amazon Web Services (AWS).
Microsoft Azure Cloud share vs AWSMicrosoft posted operating income of $20.4 billion (–8 percent) and net income of $16.4 billion (–12 percent) for the quarter ended December 31, 2022.

Microsoft generated revenue of $17 billion (+7 percent) from in Productivity and Business Processes thanks to Office Commercial products and cloud services revenue (+7 percent) driven by 11 percent increase in Office 365 Commercial revenue, 2 percent drop Office Consumer products and cloud services revenue, 10 percent increase in LinkedIn revenue.

The number of Microsoft 365 Consumer subscribers grew to 63.2 million in December 2022. Dynamics products and cloud services revenue increased 13 percent driven by Dynamics 365 revenue growth of 21 percent.

Microsoft generated revenue of $21.5 billion (+18 percent) in Intelligent Cloud driven by 20 percent increase in Server products and cloud services revenue and 31 percent increase in Azure and other cloud services revenue.

Microsoft’s revenue in Personal Computing decreased 19 percent to $14.2 billion as Windows OEM revenue dropped 39 percent, Windows Commercial products and cloud services revenue decreased 3 percent and Xbox content and services revenue decreased 12 percent and Devices revenue decreased 39 percent.

“The small miss on Microsoft’s cloud earnings forecast is likely just a reflection of the new economic reality that businesses are facing and not a harbinger of something worse,” said Bob O’Donnell, chief analyst at TECHnalysis Research.

Microsoft said in its earnings report that it forecast third-quarter revenue in its intelligent cloud business would be $21.7 billion to $22 billion.

Microsoft’s cloud business is under the spotlight again following the viral success of chatbot ChatGPT, which answers general questions in plain language using artificial intelligence. The bot is a creation of startup OpenAI, in which Microsoft is investing heavily and which requires intense cloud computing services.

“There’s a variety of ways that we can bring that technology either in specific offerings or to improve existing offerings,” said Brett Iversen, Microsoft’s head of investor relations, referring to OpenAI. He said revenue from OpenAI-related businesses would show up in revenue for Microsoft’s cloud service Azure in the future.

During the earnings call, Microsoft CEO Satya Nadella said it was early to separate out AI contribution from the Azure cloud workloads.

Azure cloud has steadily grabbed market share from leader’s Amazon Web Services (AWS).

Azure ended 2022 with 30 percent share in the cloud computing market, up from 20 percent in 2018, according to estimates from BofA Global Research. AWS dropped to 55 percent from 71 percent during the same period.

Sales at Microsoft’s More Personal Computing segment is expected to drop to $11.9 billion to $12.3 billion in the current fiscal third quarter.

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