Nadella claims Microsoft is the 'clear leader in cloud security' as sales rise again

Azure sees revenue growth of 73 per cent

Microsoft CEO Satya Nadella has talked up the vendor's cloud security expertise after reporting another quarter of sales growth.

For the three months ending 31 March 2019, Microsoft saw revenue increase 14 per cent year on year to $30.6bn (£23.8bn).

The vendor reported growth across its three segments - Productivity and Business Processes, Intelligent Cloud and More Personal Computing - with each contributing around a third of total sales (more information below).

Microsoft's cybersecurity capabilities was a recurring topic of Nadella's earnings call, in which he claimed its protection has been a key factor in winning large clients.

"Cybersecurity is a central challenge and Microsoft is the clear leader in cloud security with our unparalleled operational security posture, and our growing portfolio of security and compliance solutions, spanning identity, device end-points, email, information, cloud applications as well as infrastructure," he said on the call, transcribed by Seeking Alpha.

"In financial services, National Bank of Canada, BNP Paribas, Refinitiv - a joint venture between Thomson Reuters and Blackrock - all chose Microsoft 365 for our advanced security and compliance."

Nadella said that Microsoft is doing a better job of winning large customers in the infrastructure space than it has done in previous eras.

When asked if the vendor has found the right formula to win enterprise clients, the CEO said that Microsoft opened up a wider set of customers than it has done before.

"Compared with even the previous eras where we did well in the client server era in face of tough competition, and in this era again in the face of a different set of competitors, we are doing well and we are doing well much better than we did in the previous era.

"We are seeing these tier-one workloads which we never saw in the past. If you think about it, in the client server era we never participated in the core of the digital infrastructure or financial services or in healthcare or in retail or in manufacturing.

"It's kind of like what we would have done with some ISVs of the past."

Intelligent Cloud

The segment of Microsoft that encompasses Azure saw sales grow 22 per cent to $9.6bn. Azure revenue grew 73 per cent, the lowest amount Microsoft has reported over the last 11 quarters.

On the earnings call Nadella called Azure "the only true hybrid hyperscale cloud that extends to the edge".

Server products and cloud services revenue increased 27 per cent, while enterprise services grew five per cent.

Microsoft claims that more than 95 per cent of the Fortune 500 run their workloads on its cloud.

More Personal Computing

This segment saw sales rise eight per cent to $10.7bn as the CPU shortage started to ease. Microsoft attributed a 21 per cent rise in Surface revenue to this, as well as to strong demand for the products in Japan.

OEM revenue was up nine per cent, while commercial products and cloud services climbed 18 per cent.

CFO Amy Hood said: "In Windows, the overall PC market was stronger than we anticipated, driven by improved chip supply that met both unfulfilled Q2 commercial and premium consumer demand, as well as better than expected Q3 commercial demand.

"Therefore, OEM pro revenue grew 15 per cent and OEM non-pro revenue declined one per cent."

Productivity and Business Processes

The business unit that encompasses the likes of Dynamics, LinkedIn and Office saw its revenue climb 14 per cent to $10.2bn.

Office commercial sales increased 12 per cent, driven by Office 365 commercial revenue growth of 30 per cent.

LinkedIn revenue was up 27 per cent, while Dynamics 365 sales rocketed 43 per cent.

Nadella said that he expects Dynamics 365 to have a similar impact to SQL Server.

"Dynamics 365 and its architecture, at least in my eyes, is a thing of beauty because it's completely been rewritten for the new database technology, whether it is on the database side or on the data warehouse side," he said.

"That type of architectural approach is possible now for every SaaS application vendor out there as well.

"Because if you think about the number of business applications that were built on SQL Server, I feel that that's an architecture that can support what they want to do on the edge, as well as on the cloud."