Microsoft continues cloud transformation with 100% Azure growth

Microsoft has reported 5% revenue growth to $22.6 billion as the Intelligent Cloud business unit led the charge, with the Azure cloud offering more than doubling in revenues and compute usage.

The Intelligent Cloud unit, which includes server products and cloud services, Azure and enterprise mobility offerings grew 7% to $6.7 billion, while the Productivity and Business Processes, which includes Office commercial and consumer product lines as well as the Dynamics suite, grew 5% to $7 billion. Despite revenues in More Personal Computing declining 4% to $8.9 billion, Xbox Live monthly active users grew 33% year-over-year to 49 million and search advertising revenue grew 16% over the period.

“We delivered $22.6 billion in revenue this quarter, an increase of 5% for the quarter in constant currency,” said Satya Nadella, CEO at Microsoft. “This past year was pivotal in both our own transformation and in partnering with our customers who are navigating their own digital transformations. The Microsoft Cloud is seeing significant customer momentum and we’re well positioned to reach new opportunities in the year ahead.”

Cloud computing has once again brought Microsoft to the forefront of the technology industry following a challenging couple of years. It would appear the transition from software to cloud computing brand is being successfully navigated, though there were a few missed steps along the way, most notably the team’s foray into mobile. Microsoft is moving towards the position of ‘mega-vendor’, infiltrating almost all aspects of an organization (cloud, hardware, social, databases etc.), to make it an indispensable factor of a CIOs roster.

The Intelligent Cloud unit continues as the focal point of the company’s growth strategy, as Nadella claims nearly 60% of the Fortune 500 companies use at least three of the company’s cloud offerings, generating more than $12 billion in Commercial Cloud annualized revenue run rate.

“Companies looking to digitally transform need a trusted cloud partner and turn to Microsoft,” said Nadella. “As a result, Azure revenue and usage again grew by more than 100% this quarter. We see customers choose Microsoft for three reasons. They want a cloud provider that offers solutions that reflect the realities of today’s world and their enterprise-grade needs. They want higher level services to drive digital transformation, and they want a cloud open to developers of all types.”

AI has previously been positioned as one of the cornerstones of growth for the company, and this was reinforced during the earnings call, as Nadella noted the component of the Intelligent Cloud business unit. The Cortana Intelligence Suite, formerly known as Cortana Analytics Suite, is built on the company’s on-going research into big data, machine learning, perception, analytics and intelligent bots. The offering allows developers to build apps and bots which interact with customers in a personalized way, but also react to real-world developments in real-time.

“Just yesterday, we announced Boeing will use Azure, our IoT suite, and Cortana Intelligence to drive digital transformation in commercial aviation, with connected airline systems optimization, predictive maintenance, and much more,” said Nadella. “This builds on great momentum in IoT. This is great progress, but our ambitions are set even higher. Our Intelligent Cloud also enables cognitive services. Cortana Intelligence Suite offers machine learning capabilities and advanced predictive analytics.

“Central to our Intelligent Cloud ambition is providing developers with the tools and capabilities they need to build apps and services for the platforms and devices of their choice. The new Azure Container service as well as .NET Core 1.0 for open source and our ongoing work with companies such as Red Hat, Docker, and Mesosphere reflects significant progress on this front. We continue to see traction from open source, with nearly a third of customer virtual machines on Azure running Linux.”

The company exceeded analyst expectations for the quarter, which was reflected in pre-market trading which saw shares in the giant growing 4%. In terms of outlook for the next quarter, most business units are expected to be down a fraction on the Q2 reported figures, unsurprising considering the summer period. Intelligent Cloud is expected to bring between $6.1-6.3 million, Productivity and Business Processes $6.4-6.6 billion, and More Personal Computing $8.7-9 billion.