Microsoft cites Azure and cloud strength for more strong financials – but it’s all about the long-term ethos

It would not have been beyond the realms of possibility for this publication to open its analysis of Microsoft’s Q119 results by simply providing a link to Q418 and leaving it at that. After all, Redmond’s message has barely changed. Whereas July’s headline was ‘Microsoft Cloud drives record fourth quarter results’, this time around it is ‘Microsoft Cloud strength powers record first quarter results.’

Microsoft issued its most recent financials last night with overall revenue at $29.1 billion (£22.6bn), down 3% from the previous quarter but a 19% increase on this time last year. As ever, specific Azure figures were not given, but Microsoft noted a 76% rise in revenue growth.

Cloud revenues are based on two of Microsoft’s revenue buckets; productivity and business processes, primarily for software, which at $9.8bn for the quarter went up 19% year on year, while intelligent cloud, which focuses more on infrastructure including Azure, had a 24% yearly increase at $8.6bn. Amy Hood, Microsoft chief financial officer, said guidance was for these buckets to be at between $9.95bn-$10.15bn and $9.15-$9.35bn for Q2 respectively.

Speaking to analysts following the results, CEO Satya Nadella noted a similar theme mentioned during his Ignite keynote in Orlando last month. Microsoft’s mission, Nadella explained at the time, was to help customers become best-in-class technology companies in their own right. In other words, don’t be a supplier a customer depends on for one aspect and then sneak behind their back and compete with them on another.

Much of what was said would be familiar to those who saw the Ignite address albeit with subtle differences. Where the key customers unveiled there were Royal Dutch Shell and BMW, this time it was Volkswagen and Mastercard mentioned. “Azure is the only hyperscale cloud that extends to the edge across identity, data, application, platform, as well as security and management,” said Nadella. “We introduced 100 new Azure capabilities this quarter alone, focused on both existing workloads like security and new workloads like IoT and edge AI.”

Responding to a question around slowed capex growth, the Microsoft CEO explained the company’s intelligent cloud and intelligent edge ethos was being spread across every business line; from Azure, of course, to Dynamics 365, to gaming. It is a unified, long-term message, Nadella added. “For the first time, what you see across Microsoft is really one platform which spans all of these businesses and all of the margin structures that are there represented in it,” he said.

Dux Raymond-Sy, CMO of SharePoint and Office-centric vendor AvePoint, noted that this was the ‘complete cloud story’ and that Microsoft would reap the rewards. “While other providers can attempt to claim ascendancy on IaaS or PaaS technology, only Microsoft, with its balance of IaaS, PaaS, Dynamics 365 and Office 365 services, has created the complete cloud story for its customers, which is what is enabling them to grow at such a rapid rate, as exhibited this quarter and last quarter in particular,” he said.

Shares did indeed rise on the back of the earnings beat – but a large, AWS-shaped threat looms large on the horizon. Amazon reports its financials later today; last time out, AWS revenue was at $6.1bn, a near 50% jump on the previous year. At the time, Synergy Research maintained the Seattle-based provider was ‘in a league of its own.’

You can read Microsoft’s full Q119 results here.

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