Microsoft growth continues to be driven by cloud services in Q1

Cloud services continue to drive Microsoft growth in the first quarter of the 2019 fiscal year, despite quarter over quarter fall in Azure revenues.

However, in its quarterly earnings report announced on Wednesday, Microsoft stated that cloud services, led by Azure continue to drive the company’s growth.

Azure revenue growth during this first quarter is up 76 per cent from the same time last year but has fallen when compared to the past few quarters. As has previously reported Azure revenue growth was at 89 per cent in the fourth quarter of 2018, and the quarter before that 93 per cent, peaking at 98 per cent in the second quarter of 2018.

However cloud, specifically commercial cloud products, still remains important to Microsoft’s success, with CEO Satya Nadella calling this first quarter a record in revenue and profit for the company, which surpassed $100 billion in revenue for the first time at the end of the 2018 fiscal year.

For this first quarter Microsoft announced $29.1 billion in revenue, an increase of 19 per cent from this time last year. Nadella calling it “a very strong start” to the coming year.

In a press release Amy Hood, executive vice president and chief financial officer for Microsoft said, “our record results for Q1 reflect our commitment to long-term strategic investments and consistent execution to drive revenue growth and operating margin expansion…we see continued demand for our cloud offerings, reflected in our commercial cloud revenue of $8.5 billion.”

“Every organization today needs tech intensity to compete and grow in an increasingly digital world,” said Nadella during an earnings call, “Every organization needs to be a fast adopter of best-in-class technology. Second, they’ll need to build their own proprietary digital capability.” Nadella said Microsoft’s cloud platforms make it possible for its customers to build that tech intensity, while ensuring trust in its technology and as a company on a whole.

He agreed that Microsoft is continuing to invest in Azure, including investments in artificial intelligence through Azure ML product, with plans to make its Azure suite of products “the best cloud for enterprise data.”

Dynamics and LinkedIn continued success

Other notable growth areas for the Redmond, Washington-based company were no surprise; Dynamics products continue to grow with Dynamics 365 leading the way with 51 per cent year over year revenue growth.

LinkedIn continues to be a strong area for Microsoft, with record levels of engagement according to the press release and a revenue increase of 33 per cent. LinkedIn succes may be ‘linked’ to some recent updates made to the networking site during this quarter which introduced a new voice messaging feature and a new version of its Groups feature.

Gaming is another notable area for the tech giant, increasing 44 per cent thanks to Xbox software and services growth. Office commercial products revenue increased 17 per cent, Office consumer products grew 16 per cent and Surface revenue is also up 14 per cent when compared to the same time last year.

Nadella noted in the earnings call that Microsoft’s success is directly linked to its “accelerating innovation, picking the right secular trends and investing in large growing markets,” he touched on continued focus areas such as artificial intelligence, intelligent cloud and edge platforms, and enterprise security.

He also noted that Microsoft’s commitment to being a ‘responsible’ company is helping with growth, pointing out its AI for Humanitarian Action initiative and that it was the first company in the U.S. to require its suppliers to provide paid time off for their employees, with plans for quarter two of furthering that with paid parental leave as well.

“This recognition of our broader responsibility, coupled with our bold innovation, makes me incredibly optimistic about our opportunity ahead,” said Nadella.

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Jim Love, Chief Content Officer, IT World Canada

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Meagan Simpson
Meagan Simpson
Meagan Simpson is a staff writer for IT World Canada. A graduate of Carleton University’s journalism program, she loves sports, travelling, reading and photography, and when not covering tech news she can be found cuddled up on the couch with her cat and a good book.

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