Microsoft has seen commercial revenue from Office 365 beat the revenue generated by its traditional licensing software for the first time.
Releasing its figure for the three months ending 30 June, Microsoft said overall revenue was up 13 per cent year on year to $23.3bn (£18bn), while revenue in the cloud unit was up 11 per cent to $7.4bn.
On an earnings call, a transcript of which can be found on Seeking Alpha, Microsoft revealed that revenue from Office 365 had overtaken revenue from its traditional licensing business.
Microsoft does not release exact revenue figures for Azure, instead grouping it with Dynamics 365 and Office 365, but said Azure revenue for the quarter was up 97 per cent year on year.
"Our technology world-view of an intelligent cloud and an intelligent edge is resonating with businesses everywhere," said CEO Satya Nadella (pictured).
"Every customer I talk to is looking for innovative technology to drive new growth, as well as a strategic partner who can help build their own digital capability. Microsoft is that trusted partner."
The importance of Microsoft's cloud business was highlighted further by a decline in product sales, down 1.5 per cent to $13.8bn. Surface revenue fell two per cent, after falling 26 per cent in the previous quarter.
Nadella also referred to Microsoft's internal restructuring on the conference call, which will reportedly lead to thousands of jobs being axed as the vendor brings together its SMB and enterprise teams.
"The approach we have taken for multiple years now is to transform everything that we do inside the company," he said.
"Whether it's the product creation, how we're organised in the R&D, how we think about breaking down any silos and category definitions we may have had in the past, how we think about even marketing and the marketing approach, and then of course even with the go-to-market. This transformation is ongoing.
"Our customer expectations and our partner expectations of how we show up with them have changed, and so over the years we have been making changes and now we have a lot more momentum and critical mass, we are going to that next phase. That's what you are seeing in terms of our changing the skill set; changing the scope of how we show up to support the digital transformation needs of large customers, as well as small businesses."
Nick McQuire, vice president of enterprise research at CCS Insight, said that Azure will become the market-leading enterprise cloud platform.
"Azure is on track to become the dominant enterprise cloud platform in the industry over the next several years," he said.
"Few have the reinforcing breadth of a portfolio as vast as Microsoft's which has been combining over the past few quarters to improve its gross margins. This bodes ominously for rivals such as Amazon Web Services, Google Cloud and IBM which are desperately trying to buck the trend towards commoditisation and falling prices in cloud services.
"While successes in Azure, Office and Dynamics 365, LinkedIn as well as improvements to Surface are positive signs for 2017, the firm is not losing sight of future breakthrough technologies such as artificial intelligence and edge computing. Both are beginning to play an increasingly central role in its positioning for the future."
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