Microsoft and Google go head to head in latest cloud results
Both saw revenue gains in latest quarter but Google Cloud’s losses widened
Both Microsoft and Google Cloud reported revenue increases in their latest results though the latter's operating losses widened year-on-year.
Revenue for Microsoft's fourth quarter stood at $51.9bn, up 12 per cent year-on-year and 16 per cent in constant currency. Its cloud business - which sits under its Intelligent Cloud division - grew revenues by 20 per cent to $20.9bn. Google Cloud, meanwhile, saw sales jump from $4.6bn to $6.2bn for its second quarter.
The results for Microsoft missed Wall Street estimates but the vendor's stock rose following their publication due to a positive outlook.
And despite Google Cloud's revenue increase, the division of parent company Alphabet was unable to turn a profit and its operating loss jumped from $591m to $858m for its latest quarter.
CRN breaks down both sets of results and what they mean for the channel…
Microsoft buoyed by cloud strength
The tech giant credited cloud growth for being one of the main driving factors behind increases in revenue and profits for its fourth quarter.
Revenue for the company's Intelligent Cloud division jumped 20 per cent to $20.9bn and 25 per cent in constant currency, with Microsoft claiming that server products and cloud services revenue increased 22 per cent, 26 per cent in constant currency, which was driven by Azure and other cloud services revenue growth of 40 per cent.
Sales of Office also grew in the quarter, with nine per cent gains in both consumer and commercial Office revenue. Revenue for Windows OEM fell two per cent, however, reflecting slowing hardware sales.
Overall, net income for the quarter was $16.7bn which represents an increase of two per cent.
Diluted earnings per share was $2.23 and increased three per cent, which missed consensus expectations.
The year-on-year revenue growth was the slowest at Microsoft since 2020, with Microsoft pointing to "unfavourable" foreign exchange rates as impacting revenue and earnings, as well as production issues such as shutdowns in China and the war in Ukraine.
"Amid this macroeconomic environment, the Microsoft Cloud surpassed $25bn in quarterly revenue for the first time, up 28 per cent and 33 per cent in constant currency," CEO Satya Nadella said.
"Despite a changing market for PCs during the quarter, we continue to see more PCs shipped than pre-pandemic and are taking share."
The vendor's CFO, Amy Hood, added that operating income for fiscal year '23 is expected to be favourably impacted by approximately $3.7bn for the full fiscal year and approximately $1.1bn in the first quarter.
For the full year 2022, Microsoft's revenue was $198.3bn and increased 18 per cent, with net income of $72.7bn GAAP and $69.4 billion non-GAAP, up 19 per cent and 15 per cent respectively.
Google Cloud losses widen
Like competitor Microsoft, Alphabet's earnings also missed on expectations, as well as its revenue, which includes Google Cloud.
The division, which includes sales for Google Cloud Platform and Google Workspace, lost $858m in the quarter despite revenue climbing by over $1bn year-on-year.
But Sundar Pichai, CEO of Alphabet and Google, praised the performance of Google Cloud and said: "In the second quarter our performance was driven by Search and Cloud.
"The investments we've made over the years in AI and computing are helping to make our services particularly valuable for consumers, and highly effective for businesses of all sizes. As we sharpen our focus, we'll continue to invest responsibly in deep computer science for the long-term."
Pichai also added on the earnings call that he is not concerned by the results, claiming there is a "substantial market opportunity" in cloud.
Overall, Alphabet reported Q2 revenue of $69.7 billion, up from $61.9bn year-on-year, while net income fell from $18.5bn to $16bn.