Microsoft posts more strong financials and 62% Azure growth – with differentiation key to success

Microsoft saw its Azure business grow 62% in its most recent quarter after posting total revenues of $36.9 billion (£28.2bn) – yet chief executive Satya Nadella was keen to note the breadth of Azure’s stack as well as the bottom line.

The company’s Q220 figures, as ever divided into three primary revenue buckets, saw its ‘intelligent cloud’ stream increase 26% year over year to $11.8bn. ‘Productivity and business processes’ also hit $11.8bn at a yearly rise of 17%, while the ‘more personal computing’ category saw a negligible 1.6% yearly growth to $13.2bn – although a 19% quarterly rise. Total revenues were up 13% on Q219.

“In terms of the Azure momentum, it’s the sort of thing that we have seen even in the previous quarters,” Nadella said in response to an analyst question. “We have a stack that is, from infrastructure to the PaaS services, fairly differentiated.”

Among the products Nadella brought into focus were Azure Sentinel, a cloud-native security information and event management (SIEM) tool, and Azure Synapse Analytics, formerly Azure SQL Data Warehouse and rebadged in November. Maersk and Vodafone were cited as key of the more than 3,500 Sentinel customers – “recent CIO surveys affirm our leadership and strong structural position”, Nadella said – while Synapse was praised as a ‘very competitive product’.

Microsoft has had a very busy three months. On the product side, the launch of Azure Arc at MS Ignite in November took the headlines, following on from AWS Outposts and Google Anthos. At the time the company noted hybrid cloud capabilities ‘must enable apps to run seamlessly across on-premises, multi-cloud and edge devices.’

Hence emphasis on the breadth of portfolio. “The fact that we have a control plane for hybrid computing that is multi-cloud, multi-edge… that’s a pretty differentiated aspect of it,” said Nadella, answering a question on Azure momentum. “The data side, both on the transactions, on the OLTP (online transaction processing) side, as well as on the analytics side, we now have cloud-native databases… that’s what you see play out in terms of customer adoption and the growth there.”

On the partnership side, three deals stood out. In October, Microsoft and SAP struck an agreement featuring SAP’s Embrace project, which aims to help customers become ‘intelligent enterprises’ by utilising the hyperscaler public clouds. It was written as a ‘preferred cloud’ deal, signifying a big win for Microsoft; Nadella described it in the earnings call as ‘exclusive’. A month later, Microsoft expanded upon its partnership with AT&T, running Azure services on AT&T’s burgeoning 5G network, while Salesforce said it was migrating various suites in another ‘preferred cloud’ tie-up.

With regard to customers, the announcement in October that Microsoft had secured the $10bn JEDI government contract – pending AWS’ appeal – was the natural standout. Nadella referenced it alongside the SAP partnership as an example of winning customers through the ‘differentiated approach across the cloud and edge.’

Speaking with Nick McQuire, SVP enterprise at analyst firm CCS Insight, earlier this month, it was evident how Microsoft’s wider strategy was beginning to blossom. Microsoft’s decision to not publish specific cloud revenues – alongside Google – was previously a sign of weakness; now, while the obfuscation may frustrate the financial analysts, many accept the wider strategy at play.

“You see companies, typically from the CEO down, that are all-in on transformation, seeing the workplace environment and internal side of the house as part of that,” McQuire told CloudTech at the time. “That’s typically where you will see companies go a little bit deeper with a Google or Microsoft; they will embed the entirety of their SaaS applications capabilities in and around decision making for their infrastructure as a service as well. That approach very much favours Microsoft.”

You can view the full Q220 financial results here.

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