Strong Azure Results Gave Microsoft Another Boost in Q1

Microsoft reported stronger results for its first quarter (ended Sept. 30) that it said were yet again helped by continued growth in its Azure cloud computing business.

Revenue in Microsoft’s overall Intelligent Cloud business grew 27% from a year earlier, to $10.8 billion, the company said Oct. 23. Within that business, server products and cloud services revenue jumped 30%, “driven by Azure revenue growth of 59%,” it said in an earnings news release. Meanwhile, enterprise services revenue increased a more modest 7%.

But the cloud continued to drive growth across other areas of Microsoft’s business also. For example, revenue in Productivity and Business Processes increased 13% to $11.1 billion. Within that segment: Office Commercial products and cloud services revenue grew 13%, driven by Office 365 Commercial revenue growth of 25%; Office Consumer products and cloud services revenue increased 5% as Office 365

Consumer subscribers increased to 35.6 million; LinkedIn revenue grew 25%; and Dynamics products and cloud services revenue jumped 14%, driven by Dynamics 365 revenue growth of 45%, Microsoft said.

Revenue in the More Personal Computing business segment inched up 4% to $11.1 billion, with standouts in that segment including a 26% jump in Windows Commercial products and cloud services revenue. The one weak area was gaming, where Xbox content and services revenue was flat with a year ago.

Total Microsoft Q1 revenue grew 14% from a year earlier, to $33.1 billion, while profit jumped 21% to $10.7 billion ($1.38 a share).

One of the most positive signs for Microsoft was that, in its commercial business, “we again saw increased customer commitment across our cloud platform,” CFO Amy Hood told analysts on the company’s earnings call. “In Azure, we had material growth in the number of $10 million plus contracts,” she said.

The company’s commercial cloud business “continues to grow at scale as we work alongside the world’s leading companies to help them build their own digital capability,” Microsoft CEO Satya Nadella said on the call.

Microsoft is “accelerating our progress and innovation, starting with Azure,” he told analysts: “Organizations today need a distributed computing fabric to meet their real-world operational sovereignty and regulatory needs. This quarter, we opened new datacenter regions in Germany and Switzerland. And, in India, we are bringing the power of the Microsoft cloud to millions of small businesses through our partnership with Jio, one of the largest mobile carriers in the country,” he said.

Meanwhile, “every Fortune 500 customer today is on a cloud migration journey, and we’re making it faster and easier,” he said, adding: “Just this week, we announced an extensive go-to-market partnership with SAP, making Azure the preferred destination for every SAP customer.”

Microsoft is “extending beyond the cloud, to the edge, enabling customers to get real-time insights where data is generated while ensuring security and privacy,” he told analysts. And the company is “seeing traction in every industry – from Azure Sphere securely connecting Starbucks coffee machines… to Azure Stack enabling scenarios from smart factories and modern, compliant banking, to mobile healthcare in remote areas,” he said.

He predicted that the “quintessential characteristic of every application going forward will be” artificial intelligence (AI) and pointed to the “comprehensive portfolio” of AI tools, infrastructure and services that Microsoft offers.

Its Azure AI, meanwhile, now currently has more than 20,000 customers and over 85% of Fortune 100 companies have used it in the past 12 months, he said.

In a recent healthcare win, Novartis selected Azure AI to “transform how medicines are discovered, developed and commercialized,” he went on to say. Humana is, meanwhile, using Azure AI to build personalized health care solutions for its more than 10 million members, Nadella said.