Microsoft Azure and Google Cloud go head-to-head in quarterly results

Strong cloud sales growth contributed to record quarters for Microsoft and Alphabet

Microsoft reported record quarterly sales in its Q4 for the three months ending June 30, with Google Cloud also posting revenue gains and managing to cut its losses by almost $1bn.

The former announced a 21 per cent year-on-year revenue increase to $46.2bn, taking the vendor's sales for the past year to $168bn, up 18 per cent from the prior year in a record-breaking 12 months for the tech giant.

Revenue for Intelligent Cloud stood at $17.4bn for the quarter and increased 30 per cent, with revenue for Azure up 51 per cent. Office commercial products and cloud services revenue grew 20 per cent, while the same category for its consumer division was up 18 per cent.

"We are innovating across the technology stack to help organisations drive new levels of tech intensity across their business," said Satya Nadella, chairman and chief executive officer of Microsoft.

"Our results show that when we execute well and meet customers' needs in differentiated ways in large and growing markets, we generate growth, as we've seen in our commercial cloud - and in new franchises we've built, including gaming, security, and LinkedIn, all of which surpassed $10bn in annual revenue over the past three years."

The quarterly results saw Microsoft beat expectations, with operating income standing at $19.1bn which was up 42 per cent year-on-year and net income of $16.5bn, up 47 per cent. Meanwhile, diluted earnings per share increased 49 per cent to $2.17.

Dynamics products and cloud services revenue increased 33 per cent, driven by Dynamics 365 revenue growth of 49 per cent. But despite revenue for More Personal Computing rising nine per cent, Windows OEM revenue fell three per cent.

CTO of public cloud at cloud MSP Ensono, Gordon McKenna, said that he believes Microsoft's strategy is heading in the right direction as a real competitor to Amazon.

"With an emphasis on Azure applications, remote workplace and a boost from Microsoft Teams, it's not surprising to see Microsoft become a dominant force in the multi-cloud arena. However, it still remains to be seen if Microsoft can chip away at Amazon's revenue dominance and how the company can differentiate itself in key industries like healthcare and the public sector, but judging from recent announcements from their Partner Conference, Inspire around Industry Clouds they definitely seem to be heading in the right direction," he said.

Meanwhile CTO of Maintel, Dan Davies, said Microsoft is now "reaping the rewards" of customer cloud investments.

"Microsoft has gone from strength to strength on the back of impressive cloud growth. The pandemic has forced companies to put in place the technology and infrastructure to allow employees to work from anywhere. Consequently, Microsoft has been there to reap the rewards of the resulting investment in cloud," he said.

"With the shift to cloud still in its infancy, the market is set to see revenues continue to grow. Microsoft is perfectly positioned, with its Azure and Office 365 offerings, to capitalise on this."

Google Cloud saw revenue for its Q2 increase by 54 per cent to $4.6bn from $3bn during the same period last year. It was also able to cut its losses significantly, reporting an operating loss of $591m, down from $1.43bn year-on-year.

Google CEO Sundar Pichai said an increase in cyber-attacks had contributed to customers adopting Google Cloud because of its "zero-trust approach", while features like Google Workspace had "continued to show strong growth".

It contributed to record quarterly sales for parent company Alphabet with an increase of 62 percent to $61.9 billion in the second quarter up from $38.29 billion, outperforming consensus expectations.