Microsoft’s Earnings get a Big Boost from its Cloud Business
Microsoft’s cloud computing business went into acceleration mode during the last quarter, and this is evident from the latest earnings reported by the company on Thursday. According to a press release, Microsoft’s commercial cloud business, including the sale of cloud-based Office 365, soared by 49 percent from the previous quarter.
Though cloud business is not a separate reporting segment, the online and on-premises versions of its cloud-based software such as Office 365 and Dynamics saw a six percent increase, as sales climbed to a whopping $6.7 billion. Revenue from Azure grew by 116 percent, and the company reports that the use of Azure’s compute service doubled as well during the same period.
These numbers signal a number of things for the company as well as for the industry as a whole. Firstly, there is a digital wave influencing the operations of many mainstream businesses, and Microsoft is making the most of this wave. The company’s overall strategy and long-term vision helped it to position itself to ride this digital wave, and these efforts have definitely paid off.
Satya Nadella, the CEO of Microsoft, opines that digital technology is not just for the startups located in Silicon Valley, rather they are becoming an integral part of the operations of every company. In this sense, almost every company is becoming a digital one, and Microsoft has positioned itself to serve these companies well.
The second significant aspect about this earning is the change in Microsoft’s business. Earlier, licensing software that customers install on their own computers was a lucrative business for the company. However, declines in this line of business were offset by sales from the cloud business, and this goes to show that cloud business is overtaking software licensing in terms of revenue generation. Going forward, there is a possibility for Microsoft to increase its focus on the cloud business over its licensing segment, though there are no official confirmations in this regard.
Thirdly, these results prove the fact that Microsoft is one of the leading cloud providers out there today. Along with Amazon AWS, a substantial part of the market is shared by these two companies, and much of it can be attributed to the early investments it made in cloud. Machine learning capabilities and a deep business understanding are other factors that have contributed to this stellar growth for Microsoft.
Over the next year too, the company sees a lot of optimism in the cloud market, and it expects sales from its cloud-based platforms to increase. This is good news not just for Microsoft, but for the tech industry as a whole, as many segments are still reeling from the economic slowdown.
All these factors have pushed the price of Microsoft’s shares to an all time high of $60.75 during after-trading hours on Thursday. If this buoyancy continues today, then Microsoft’s shares would set new records for its share price. The highest so far was $59.56 during the dot-com bubble of 1999, and this record could bring much cheer for investors.