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Microsoft has announced third-quarter 2018 revenues of $26.8bn, up by 16% on the same quarter in 2017. Its commercial cloud business, meanwhile, grew by 58% to $6bn.
The company put the substantial boost in commercial cloud revenue down to healthy growth in the US, Western Europe and the UK. While Microsoft did not break down the demand for Azure coming from customers seeking to comply with the EU’s General Data Protection Regulation (GDPR), CEO Satya Nadella claimed the Microsoft cloud was a cost-effective way to meet GDPR requirements.
The tech giant’s server products and cloud services business grew by 20% to $6.3bn in its third quarter, driven by continued strong demand for Azure, while its intelligent cloud segment delivered revenue of $7.9bn, a 17% increase on the 2017 figure.
Microsoft’s chief financial officer, Amy Hood, said its on-premise server business grew by 3%, driven by customer demand for a hybrid cloud.
In a transcript of the earnings call posted on the Seeking Alpha financial blogging site, Nadella said: “The key thing we think about is differentiation of Azure at each level, because that is super-important for us as we compete in this marketplace and, more importantly, double down on areas of differentiation we have.
“So, the first thing is on the infrastructure side itself, with the combination of the edge and the cloud, Azure Stack and Azure, as well as inclusive of our servers. I believe between them we have the best platform for what is going to be hybrid computing and we’ll continue to push on that, so you'll see growth. It’s just got a different margin profile.”
While Nadella anticipated moderate Azure growth rates as its market share increased, he predicted Microsoft’s opportunity would be in higher-value services.
Satya Nadella, Microsoft
Nadella said its Cosmos DB, launched in 2017, was experiencing a high adoption rate. “I’ve been around databases for a long time, and I've never seen a product that’s gotten to this kind of scale this quickly, so we’re very bullish about what can happen in the higher-level services and we’ll continue to build on that piece,” he said.
Microsoft is building its main products and services on the same architecture. “One of the key things is, architecturally, the way we build Azure, the way we build Office 365, the way we build our gaming cloud and the way we build even Dynamics, are all on one architecture,” said Nadella.
He said Microsoft had been working on becoming GDPR compliant since 2016 and the company would be providing tools, backed by its contractual commitments, to help its customers comply with GDPR. However, Nadella claimed the Microsoft cloud could be a more cost-effective way to achieve GDPR compliance.
“For most customers, it will be more effective and less costly to host their data in Microsoft’s GDPR-compliant cloud than to develop and maintain GDPR compliance tools themselves,” he said.
Read more about Microsoft’s cloud platform
- Microsoft’s Azure Stack platform provides a means for organisations to create more flexible and consistent hybrid private/public cloud environment.
- While it has paid a massive US tax bill, financial results show Microsoft is making progress on its intelligent cloud hybrid strategy.