M+E Connections

Strong performance in Microsoft’s Intelligent Cloud business again provided a boost for the company’s results in the third quarter (ended March 31) as a 50% increase in Azure revenue drove a 26% increase in server products and cloud services revenue, the company said April 27.

Intelligent Cloud revenue grew 23% from a year ago to $15.1, while operating income in that business increased to $6.4 billion from $4.6 billion.

In an earnings call with analysts, Microsoft CEO Satya Nadella called it a “record quarter, powered by our continued strength of our commercial cloud.”

More than one year into the COVID-19 pandemic, “digital adoption curves aren’t slowing down,” he said. “In fact, they’re accelerating, and it’s just the beginning,” he predicted, forecasting “digital technology will be the foundation for resilience and growth over the next decade.”

Highlighting Microsoft’s “growing opportunity and momentum, he said: “We are building Azure to address organizations’ needs in a multi-cloud, multi-edge world. We have more datacenter regions than any other provider, including new regions in China, Indonesia, Malaysia, as well as the United States.”

Azure has “always been hybrid by design, and we are accelerating our innovation to meet customers where they are,” he told analysts, adding: “Azure Arc extends the Azure control plane across on-premises, multi-cloud, and the edge, and we’re going further with Arc-enabled machine learning and Arc-enabled Kubernetes. Companies like Fujitsu and KPMG are using Arc to simplify hybrid management and run Azure data services anywhere.”

Moving on to data and analytics, Nadella said: “Core to the competitiveness of every company going forward will be their ability to turn data into predictive and analytical power.” And, to that end, the “next-generation analytics service Azure Synapse accelerates time to insight by bringing together data integration, enterprise data warehousing, and big data analytics into one unified service,” he said.

Using Azure Machine Learning, organizations “can build advanced” artificial intelligence (AI) models, he noted.

Microsoft is also “leading in hyperscale SQL and non-SQL databases to support the increasing volume, variety, and velocity of data,” he told analysts. “Customers continue to choose Azure for their relational database workloads, with SQL Server on Azure VMs use up 129 percent year over year.”

Meanwhile, large-scale AI models are becoming platforms, and there have been “dramatic advances in research and deployment by Open AI, whose models are trained and hosted exclusively on Azure,” he said.

Using Azure Cognitive Services, organizations “can build applications that see, hear, speak, search, understand and accelerate decision-making,” he also said, noting: “New capabilities enable developers to add semantic search to their apps and help companies” including AT&T and Progressive “build custom neural voices for their products.”

Microsoft is also “going further with Azure Percept, a complete platform – from silicon to service – which simplifies the process of developing, training, and deploying AI at the edge,” he said.

“As the virtual and physical worlds converge, the metaverse – comprised of digital twins, simulated environments, and mixed reality – is emerging as a first-class platform,” and “traction” is being seen across the public and private sectors, he noted.

Bentley Systems is “building a digital twin of the city of Dublin to reimagine urban planning using Azure Digital Twins and Azure IoT” (Internet of Things), he noted. PepsiCo, meanwhile, is “simulating its manufacturing processes to improve product consistency, using our autonomous systems platform,” he said, adding: “From Airbus and Toyota, to L’Oreal and Intel, customers in every industry are transcending space and addressing complex challenges using mixed reality. The U.S. Army, for example, will use a HoloLens-based headset, augmented with our cloud service.”

In security, Microsoft is “delivering on our ambition to eliminate passwords, introducing password-less sign-in to Azure AD,” he said, noting Azure AD’s “paid customer base has more than doubled year over year to over 300,000.”

Total Microsoft Q3 revenue grew 19% from a year ago to $41.7 billion, with profit increasing 44% to $15.5 billion as earnings per share increased to $2.03 from $1.40.

Revenue in More Personal Computing grew 19% to $13 billion, with Windows OEM revenue and Windows Commercial products/cloud services revenue each up 10%, and Xbox content and services revenue up 34%.

Revenue in Productivity and Business Processes increased 15% to $13.6 billion, with Office Commercial products and cloud services revenue up 14%, Office Consumer products and cloud services revenue up 5%, LinkedIn revenue up 25%, and Dynamics products and cloud services revenue up 26%.

Amid the ongoing pandemic, “hybrid work will require a new operating model [and] that’s why we built Teams as the organizing layer for all the ways people work, learn, and collaborate,” Nadella told analysts.

Teams now has more than 145 million daily active users, nearly “double the number a year ago,” he noted, adding: “In markets where employees have returned to the workplace, including Australia, China, New Zealand, South Korea, and Taiwan, we have seen usage continue to grow.”

Microsoft is also “accelerating our innovation” for Teams, “adding over 300 features over the past year, including more than 100 new capabilities so far in 2021,” he added, pointing to: “New inclusive meeting experiences for hybrid work, including custom gallery views, [that] enable anyone to be seen, heard, and participate – whether they are at home, in a meeting room, at an office, or on a factory floor.”