Analyzing Microsoft’s Q4 Results

Microsoft announced a strong fourth quarter results last Thursday and as expected, much of it was from its fast-growing cloud business.

Revenue from its cloud business rose by 11 percent to a whopping $7.43 billion. This was more than the expectations from analysts who had predicted a revenue of just $7.32 billion. Out of this, Azure had a major share as its revenues almost doubled this quarter.

Azure has been a stellar performance for Microsoft over the last few years as its revenue has increased by 61 percent year-on-year. To build on this momentum, Microsoft released a new product called Azure Stack two weeks back. This service gives customers the choice to run a local version of Azure for better speed and performance.

These results clearly show that Microsoft has found its niche in the cloud market through Azure. A few years ago, this company was struggling in the tech space as its experiments with mobile phones and Internet search was not yielding the expected results.

It all changed in 2014 when Satya Nadella took over as the CEO of the company and began focusing on the cloud segment. Though this move was seen as a gamble, it has sure paid off three years later. Undoubtedly, Azure is one of the sought-after product among clients who want to leverage cloud. Though it is behind AWS, Azure has its own share of clients. It’s too early to say if Azure will overtake AWS in the future, but at the same time, we can’t completely rule out this possibility either.

Microsoft is pushing Azure aggressively to overtake AWS in terms of revenue. According to Amy Hood, the Chief Financial Officer of Microsoft, the company has closed the highest number of multimillion dollar Azure deals to date this quarter. She even said that this was the first time that the revenue from Office 365, the online cloud-based productivity suite, exceeded that of the traditional Microsoft Office business.

Going forward, cloud will be the staple of Microsoft’s business.

In other aspects of the earnings, the overall net income jumped to $6.51 billion to about 85 cents per share. A year ago, the revenue was a mere $3.12 billion or 39 cents a share. This goes to show that Microsoft’s net income more than doubled within the last year.

It’s total revenue was $24.7 billion or 93 cents a share, which is way more than what Wall Street analysts had predicted.

However, a spot of bother for some analysts is that Microsoft has not invented any revenue stream like Apple. So, they opine that when the cloud market saturates, Microsoft may go back to where it was a few years back. As the revenue from cloud keeps coming in, it makes sense for Microsoft to explore alternate revenue streams that can enter its mainstream revenue within the next few years.

But for now, Microsoft is one cloud nine with its fourth quarter results.

About The Author
Lavanya Rathnam is a professional writer of tech and financial blogs. Creative thinker, out of the boxer, content builder and tenacious researcher who specializes in explaining complex ideas to different audiences.
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