Microsoft results show a distributed computing future

While it has paid a massive US tax bill, the company's results show Microsoft is making progress on its intelligent cloud hybrid strategy

Microsoft announced second quarter revenue of $28.9bn, up 12%. But as expected, the company incurred a tax charge of $13.8bn related to the enactment of the Tax Cuts and Jobs Act.

The company reported 98% Azure revenue growth this quarter and commercial cloud revenue growth of 56% year-on-year to $5.3bn. The shift to Office 365 recurring revenue is also beginning to pay off, with the company reporting a 41% increase in Office 365 commercial revenue from installed base growth.

“Our investments in IoT [internet of things], data, and AI [artificial intelligence] services across cloud and the edge position us to further accelerate growth,” said Microsoft CEO Satya Nadella.

In a transcript of the earnings call posted on the Seeking Alpha financial blogging site, Nadella highlighted the Spectre and Meltdown security issue, describing them as “the latest instances in an increasingly complex threat environment”.

“Our investments to make Windows 10 the most secure, always up-to-date operating system enabled us to move quickly to protect customers in the face of these threats,” he said.

Nadella described how Microsoft was making voice a first-class input for productivity. The company plans to provide dictation in multiple Office 365 apps.

Microsoft’s Azure cloud is regarded as the second biggest public cloud, behind Amazon Web Services (AWS).

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He said the company was seeing big growth in America and Europe for Azure. “We clearly see things first happening in the US and quickly followed by geographies like Germany and the UK. There are certain workloads like the IoT workload, where we do see very advanced action in countries like Germany –especially with industrial customers in terms of smart factories.”

When asked about growth in its intelligent cloud business, Nadella said: “It all comes down to having an architectural advantage on what is a new secular trend. We’re the only cloud provider that provides true hybrid cloud computing with Azure and Azure Stack.

“There are new workloads being born that require both the cloud and the edge – IoT being a great example of that. And especially when you take that in combination with AI, again, you train on the cloud and you score on the edge,” he said. “That’s a real competitive advantage.”

Nadella said Microsoft expects computing to become a distributed computing fabric in the future. As an example, he described how a factory could install sensors. Data collected from these edge devices are then uploaded to the cloud.

“When I think about hybrid computing at least in the fullness of time, it’s more the future of distributed computing – where there is a cloud, there is an edge. And even the edge is not just one single edge. But it’s got a topology associated with it, going all the way to the sensors – whether it’s at home, in a hospital or in a factory.”

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