How did Microsoft Fare?
It’s that time of the year again when tech companies report their quarterly results. For investors and the general public, this is a good time to evaluate how a company is performing, how its different sectors and what can be expected from the company over the next few months.
Microsoft announced its results for the third quarter of 2017, and surprisingly, it fell short of analysts’ expectations. The company reported a revenue of $23.56 billion while analysts were expecting a revenue of $23.62 billion. But in terms of earnings per share (EPS), Microsoft surpassed investors’ expectations as they had been expecting a revenue of $0.70 and Microsoft reported $0.73.
One of the key things to note in the results is the role played by cloud business in boosting the overall revenue of Microsoft. The cloud-based services including Azure and “Intelligent cloud” brought in revenue to the tune of $15.2 billion and this is a 11 percent increase year-on-year. In fact, Azure’s revenue jumped by 93 percent when compared to the same time last year.
According to Amy Hood, the Chief Financial Officer at Microsoft, strong execution and the growing demand for cloud business drove up the revenues this quarter and as a whole, the company expects this demand to sustain over the next few quarters as well. In this sense, they expect to generate more revenue from Azure and its “intelligent cloud” division over the upcoming months.
This is an important trend as it clearly lays out the path for Microsoft, or for that matter, many tech companies that operate in this line of business. Already, Microsoft has been investing heavily in its cognitive services and Azure platform, and we can expect this investment to increase too.
Other important gleanings from these results include the price that customers are willing to pay for services. For example, the results show that 80 percent of Azure customers use premium pricing plans. This means, customers are willing to pay more money provided they get the right value additions for the money they pay.
One aspect that we’ve been seeing is that the cloud wars have brought down the price of cloud services. Leading cloud providers like Microsoft, Amazon Web Services and Google have been slashing their prices greatly in a bid to woo more customers. Due to this trend, premium services itself don’t cost a lot and can in fact, be affordable to many clients. That said, we can infer that this demand for premium plans could be because it’s affordable and companies get more from it.
Besides cloud, Microsoft’s Productivity and Business processes segment registered a 22 percent increase when compared to the same time last year, as its revenues soared to $8 billion. Commercial office was up by seven percent while consumer revenues grew by 15 percent respectively. The Personal Computing segment took a beating though as it registered a seven percent decline in sales.
Overall, Microsoft had a decent performance though not a stellar one, and much of it was driven by its cloud business.