Microsoft grows cloud business

Microsoft's Azure and cloud business experienced triple-digit growth in its fourth quarter of 2015, according to CEO Satya Nadella

Microsoft has reported a $2bn loss on revenues of $22bn in its fourth quarter of 2015, due to charges associated with the purchase of Nokia’s mobile phone business and restructuring.

Commercial revenue increased slightly to $13.5bn, while commercial cloud revenue grew by 88%, driven by Office 365, Azure and Dynamics CRM Online, Microsoft stated. Server products and services revenue grew by 4% and revenue in its Dynamics business grew by 6%.

In a transcript of the earnings call posted on the Seeking Alpha financial site, Microsoft CEO Satya Nadella said: “In Azure, both revenue and compute usage increased by triple digits year-over-year. We tripled our revenue from Azure premium services this quarter.”

Nadella said Microsoft had benefited from the trend for traditional businesses to build their own software and IT-powered services

“As every company out there becomes a software company, beyond even our traditional reach through IT, everyone has a digital office inside the company. They are, in fact, doing things in advanced analytics and using machine learning, and that's a place where we have some very unique capabilities. So that's another place where we're seeing wide adoption,” he said.

According to Nadella, this adoption of cloud services to drive digital business is pushing growth in Azure as the cloud back end for mobile apps across Android, iOS and Windows devices, as well as business websites. He said Office 365 and Windows 10 represented major growth opportunities for Microsoft. 

Commenting on the soon-to-be-released Office 2016 product, Nadella said: “Last week, at our Worldwide Partner Conference, we announced our new Office 365 Premium SKU for business, E5. Now our customers will get rich new voice functionality in Skype for Business with Cloud PBX and PSTN Conferencing, deep analytics with Delve analytics and Power BI Pro, and advanced security features such as lockbox and advanced threat protection. With E5, we have expanded our market opportunity for Office 365 by more than $50bn.”

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Regarding Windows 10, he said PC manufacturers have hundreds of new designs, which will drive adoption of the new desktop operating system. 

Given that Windows 10 will be updated continuously, there will be a change to how Microsoft accounts for Windows licences. 

“The accounting for Windows 10 will change,” said Microsoft's chief financial officer, Amy Hood. “We will be deferring a portion of Windows 10 revenue, primarily OEM, and recognising it over time, generally two to four years.”

At the company's Convergence conference in March, Nadella urged businesses to look at how they can be transformed through data. “Every business will become a software business, build applications, use advanced analytics and provide SaaS [software as a service],” he said.

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