Microsoft released its quarterly results overnight, with revenue up 12 per cent year on year to $28.8bn (£20.3bn). Operating income was up 10 per cent to $8.7bn.
CEO Satya Nadella highlighted Microsoft's investment in IoT, AI and cloud as key to the growth. We've picked out the four key takeaways from the financial report and Nadella's earnings call.
Azure doubles again
Microsoft is still resisting the urge to show us the true scale of its Azure business, restricting us to just a percentage of growth rather than true revenue. Year on year, Microsoft said its Q2 Azure revenue was up 98 per cent. In the previous quarter revenue was up 90 per cent, so Azure uptake is showing no signs of slowing.
Microsoft's coyness around Azure makes it difficult to make a direct comparison with Amazon Web Services (AWS), but it does clump together a bunch of its cloud services under a ‘Commercial Cloud' heading to at least give us something; this includes Office 365, Dynamics 365, Azure and other cloudy things.
Microsoft said these components of the business pulled in $5.6bn over the quarter, up 56 per cent on last year.
By comparison, AWS saw quarterly revenue of just under $4.6bn when it reported its last numbers in October.
More formally, Microsoft's $28.9bn is broken into three business units: Productivity and Business Processes; Intelligent Cloud; and More Personal Computing.
Personal computing is still the highest-performing area of Microsoft's business, generating $12.2bn in revenue, while Intelligent Cloud made $7.8bn and the business productivity unit just under $9bn.
On-premise makes a comeback
While Azure's growth is (partially) there to see, Microsoft has over recent months placed a greater emphasis again on on-premise infrastructure, with the launch of Azure Stack.
On an earning's call, transcribed by Seeking Alpha, Nadella (pictured) said the addition of an on-premise version of Azure made Microsoft the only player that can provide a full hybrid cloud solution.
"Only Microsoft delivers hybrid consistency, developer productivity, AI capabilities, and trusted security and compliance," he said. "This architectural advantage helps us address both existing enterprise workloads and new workloads such as IoT and edge AI.
"To thrive in this new era, customers need a consistent stack across public cloud and the edge, a model Azure Stack uniquely enables."
Nadella did not give any numbers to show Azure Stack's progress, saying only that Microsoft is seeing "incredible demand".
UK an Azure leader
Nadella offered a deeper insight into Azure uptake when quizzed by an analyst, picking out the UK as one of the frontrunners when it comes to cloud adoption.
As expected, he said the US leads the way, but added that the UK and Germany are not far behind.
"The US has been a lead market in general when it comes to the latest technology and architectural paradigm adoption... AI or the higher-level services around data," said Nadella.
"We clearly see first things happening in the US and quickly followed by geographies like Germany and the UK. But broadly, I don't see any difference than, say, what we used to see or what we still see on our server or any other technology adoption curve."
Earlier in the call CFO Hood had praised Microsoft's channel partners for helping Microsoft deliver "outstanding commercial results" around these key areas, despite the vendor still adjusting to the "sales reorganisation" it embarked on last year.
Computing lags behind
While personal computing remains the main breadwinner for Microsoft, its growth is less impressive than in areas such as cloud.
The business processes and Intelligent Cloud units saw revenue growth of 25 per cent and 15 per cent respectively, but personal computing saw growth of just two per cent.
Within computing Microsoft's Bing search engine was the shining light, with advertising revenue up 15 per cent. The launch of a new Xbox console saw gaming revenue up eight per cent.
Microsoft's Surface hardware revenue was almost flat, up one per cent. On the earnings call, Nadella said the vendor is continuing to transition to the new generation of Surface products, namely Surface Laptop, Surface Pro, and Surface Book 2.
CFO Amy Hood said Microsoft expects Surface sales to grow year on year over the course of the 2018, but said sales will likely drop on a quarter-by-quarter basis during the next quarter, with Q2 having been boosted by holiday sales.
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