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Azure propels Microsoft intelligent cloud earnings

Microsoft's hybrid approach to cloud computing is starting to pay dividends, as the company's Q4 2017 financial results show

Microsoft has reported a boom in its Azure cloud service in its 2017 Q4 filing, with revenue in its intelligent cloud growing 11% to $7.4bn.

It highlighted that Azure revenue grew 97%, which contributed to 15% growth in the company’s server products and cloud services revenue.

Microsoft reported that Office commercial products and cloud services revenue increased 5% due to Office 365 commercial revenue growth of 43%, while Dynamics products and cloud services revenue increased 7% – driven by Dynamics 365 revenue growth of 74%.

However, Microsoft said its Enterprise Services revenue decreased 3%, with declines in customer support agreements offset by growth in Premier Support Services.

Its personal computing division, More Personal Computing, reported Windows OEM revenue increased 1%, while Windows commercial products and cloud services revenue increased 8%, driven by annuity revenue growth.

Sales of its Surface device decreased 2%, but Microsoft claimed this was due to product lifecycle transitions. For the quarter, it reported a revenue of $23.3bn. Revenue for the full year was $89.95bn, up from $85.32bn in 2016.

In a transcript of the earnings call posted on the Seeking Alpha financial blogging site, Satya Nadella, CEO at Microsoft, said: “Our technology world view of an Intelligent Cloud and an Intelligent Edge is resonating with businesses everywhere.” Nadella claimed its customers were moving beyond core workloads to adopt higher value workloads.

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The benefits Microsoft provides for businesses include converting their data into artificial intelligence (AI) that drives competitive advantage. “It all starts with having support for the comprehensive data estate, spanning Azure Database, Cosmos DB, Data Warehouse, Data Lake, combined with SQL Server,” he said. “Customers are infusing AI into their products and services using Azure AI infrastructure and features such as Bot Framework and Cognitive Services.”

While the company has pushed the benefits of cloud computing on Azure, Nadella said Microsoft’s latest offering, Microsoft 365, links Windows 10 with the cloud products to provide a secure workplace. “We think of the modern workplace as having a very significant footprint of Windows, but people will also use phones of iOS and Android,” he said.

“They need both productivity, creativity, and security across all of this estate, and that’s where I think we have a competitive advantage and a great value proposition. That’s what Microsoft 365 embodies.”

Nadella said Microsoft was making a big architectural shift from thinking about migration of applications to the public cloud to looking at Azure as part of a future distributed computing infrastructure. This model would see products such as Azure IOT or Azure Stack become runtime environments for edge computing applications, where the Microsoft cloud is not only used for storage and computing, but also to run AI.

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