Microsoft breaks through clouds into the Azure as Q1 revenues soar

21 Oct 2016

Microsoft Ireland country manager Cathriona Hallahan speaking with CEO Satya Nadella, during his recent visit to Dublin. Image: Naoise Culhane

Azure public cloud revenues rising 116pc year-on-year means Microsoft has been vindicated in its vision for tech. But there are storms on the horizon for the company.

Software giant Microsoft last night reported strong Q1 revenues of $20.5bn and profits of $4.7bn, as big bets on cloud paid off.

Azure compute usage more than doubled year-over-year.

‘We are helping to lead a profound digital transformation for customers’

Future Human

Revenues in Microsoft’s intelligent cloud business were up 8pc, Azure revenue was up 116pc, and server revenue was up 11pc.

Microsoft returned $6.6bn to shareholders in the form of share repurchases and dividends in the first quarter.

Revenue in the company’s Office group were up 5pc, driven by commercial revenues from Office 365 growing 51pc. There are now some 24m Office 365 consumer subscribers.

“We are helping to lead a profound digital transformation for customers, infusing intelligence across all of our platforms and experiences,” said Satya Nadella, CEO at Microsoft.

“We continue to innovate, grow engagement, and build our total addressable market.”

Still not a perfect vista for Microsoft

However, all is not entirely well in the Microsoft camp, with the vista being somewhat mired by a 72pc drop in revenues from its phone division.

Microsoft’s phone revenue fell from $2.6bn two years ago to just $300m in the last quarter, making the Redmond software giant pretty much a non-player in a mobile market that is really divided between Google’s Android and Apple’s iOS.

Windows OEM revenues have also been flat year-over-year, but slightly ahead of the prevailing winds in the PC market.

Windows commercial products and cloud services were also flat.

Gaming revenue declined 5pc driven by lower Xbox console revenue.

Search advertising revenue, however, was up 9pc, driven by increased revenue per search and volume.

“Our first quarter results showed continued demand for our cloud-based services,” said Amy Hood, executive VP and CFO at Microsoft. “We continue to invest, position ourselves for long-term growth, and execute well across our businesses.”

The Q1 figures show a Microsoft battleship being slowly turned around. Although older businesses and strategic failures – such as the acquisition of Nokia – are still taking their toll, Nadella’s vision for cloud is driving gains.

Overall, the sky for Microsoft seems almost perfectly Azure.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years