Microsoft excels as Cloud revenue overtakes Windows business

Microsoft revealed that its revenue rose 12 percent to $33.72 billion, while net income grew 49 percent to $13.19 billion in the fourth quarter.
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Microsoft CEO Satya Nadella said: “Our commitment to customers’ success is resulting in larger, multi-year commercial cloud agreements and growing momentum across every layer of our technology stack.”

Revenue growth in Azure, the cloud platform of Microsoft, was 64 percent in the fiscal fourth quarter ended June 30 as against 89 percent a year earlier and 73 percent in the prior quarter.

Microsoft does not provide revenue figure for Azure. Microsoft clubs Azure revenue as part of the intelligent cloud unit, which clocked revenue of $11.4 billion registering growth of 19 percent.

Microsoft also forecasted between $10.3 billion and $10.5 billion in intelligent cloud sales for the fiscal first quarter.

Microsoft’s Azure-based business segment for the first time reported slightly more quarterly revenue – of $11.4 billion – as compared with $11.3 billion revenue from Windows-based segment.

Azure’s main rival in the cloud computing business is Amazon Web Services (AWS), which dominates the industry with a 32.8 percent market share, according to research firm Canalys. Microsoft has a share of 14.6 percent, while Google has 9.9 percent.

Microsoft has gained ground in the past year by bundling its Azure computing service for developers along with Office and other software products for end users, such as in the more than $2 billion cloud deal it signed with AT&T earlier this week, Reuters reported.

Microsoft has tried to set itself apart from AWS by combining its traditional software that runs in a customer’s own data center with its Azure products, a hybrid cloud strategy strategy that Chris Voce, analyst at Forrester, said helped power the company’s results.

Revenue in Microsoft’s productivity software unit rose 14.3 percent to $11.05 billion, driven by double-digit revenue growth for LinkedIn and Office 365.

Its personal computing division, home to Windows software, rose to $11.3 billion. The unit also includes Xbox gaming consoles, the Bing online search service and Surface laptops.

Mike Spencer, head of investor relations at Microsoft, said Windows results were fuelled by customers upgrading from Windows 7, which will be retired next year, and the result of some PC customers stockpiling inventory in anticipation of possible tariffs.

He said the company did not feel any impact from sales restrictions placed on Huawei by the U.S. government.