M+E Connections

Azure Strength Gave Microsoft a Q2 Lift

Strong performance in Microsoft’s Intelligent Cloud business provided a boost for the company’s results in the second quarter (ended Dec. 31) as a 50% increase in Azure revenue drove a 26% increase in server products and cloud service revenue, the company said Jan. 26.

Intelligent Cloud revenue grew to $14.6 billion from $11.9 billion a year earlier, while operating income in that business increased to $6.5 billion from $4.5 billion.

In an earnings call with analysts, Microsoft CEO Satya Nadella highlighted how he said the company is “innovating across every layer of the modern tech stack, starting with Azure.”

Microsoft is “building Azure as the world’s computer to support organizations’ growing cloud needs,” he said, noting the company is investing to bring cloud services to more customers. On that front, Microsoft announced seven new datacenter regions in Asia, Europe and Latin America, and he said it added support for “top secret classified workloads” in the U.S.

The company has “always led in hybrid computing, and we are accelerating our innovation to meet customers where they are,” he told analysts. For example, Azure Stack HCI, “now broadly available, helps businesses extend the power of the cloud to sovereign workloads,” he said.

Meanwhile, more than 1,000 customers are now using Azure Arc “to simplify hybrid management and run Azure services across on-premises, multi-cloud and at the edge,” he said.

With the Azure Digital Twins Internet of Things (IoT) platform, organizations including Bentley Systems, Honeywell Industries and Johnson Controls can now “bridge the digital and physical worlds, creating simulations of factories and cities to optimize their operations,” he told analysts.

Microsoft is “seeing momentum in every industry,” he said. As an example, he noted Deutsche Telekom “will rely on Azure to modernize its IT infrastructure.” Cruise and GM, meanwhile, selected Azure “as their preferred cloud as they work to make autonomous driving mainstream,” he noted.

In addition, Microsoft recently announced an expansion of its partnership with SAP “to accelerate the adoption of SAP workloads on Azure,” he said, adding: “In the past six months, we have seen Tier 1 ERP migrations from companies such as Bayer, Carhartt, Coats and PepsiCo to Azure.”

At the data layer, meanwhile, “Azure is the only cloud with limitless data and analytics capabilities that enable organizations to build the predictive and analytical power required to digitally transform,” he told analysts.

Noting that Microsoft’s Azure Synapse analytics service is bringing together big data, data warehousing and data integration, all in “one powerful solution,” he said companies including FedEx and P&G are using it “to generate immediate insights from massive amounts of structured and unstructured data.”

Data governance is now “top of mind for every business leader and will grow into an important category on its own” that is “as critical as any” artificial intelligence (AI) or analytics category today,” he predicted. To that end, Microsoft is investing to participate in that growth, he told analysts.

The new Azure Purview data governance service “provides an end-to-end view of an organization’s data estate across on-premises, multi-cloud” and Software-as-a-Service (SaaS) apps that “previously was impossible,” he said.

In AI, Microsoft is offering a comprehensive portfolio of tools, frameworks and infrastructure that he said is “enabling businesses to build mission-critical solutions that comprehend speech, understand natural language, make predictions, provide insights and support decision-making.”

For example, Azure Health Bot is being used by organizations including Walgreens “to build virtual healthcare assistants used by more than 80 million people worldwide at a time when expanding access to healthcare information is more critical than ever,” he said.

Total Microsoft Q2 revenue grew 17% from a year earlier to $43.1 billion, while profit jumped 33% to $15.5 billion ($2.03 a share) from $11.6 billion ($1.51 a share).

Revenue in More Personal Computing increased 14% to $15.1 billion, with Xbox content and services revenue soaring 40% behind the launches of the Xbox Series X and Series S, which Nadella called the “most successful” launch for Microsoft ever, “with the most devices ever sold in a launch month.” Microsoft is gaining video game console market share, he said.

Microsoft also exceeded $2 billion in revenue from third-party video game titles this quarter for the first time, he noted.

The Xbox Live online service, meanwhile, has more than 100 million monthly active users, while the Game Pass subscription game service now has 18 million subscribers, he said.

The company is “pleased with the overall growth in our consumer subscriptions,” he said, adding: “With Game Pass and more than 47 million Microsoft 365 Personal and Family subscribers, we have a large and growing consumer subscription business. And we see significant growth opportunity in both these segments as they move to services and on-demand models.”