Microsoft Finishes Strong In Fiscal 2017 As 'Intelligent Cloud' Takes Off
Cloud products drove solid results for Microsoft during the final quarter of its fiscal year 2017, the company reported Thursday, as it looks ahead to a revamped push around partner-led growth in the future.
Microsoft's fiscal fourth quarter ended June 30 saw revenue rise 13 percent to $23.31 billion. That's up from $20.61 billion during the same period a year earlier.
Fiscal 2017 was "a tremendous year of customer momentum, with cloud, AI and digital transformation," Microsoft CEO Satya Nadella said during the company's earnings call. Microsoft's approach to offering "intelligent cloud and intelligent edge [is] resonating with customers everywhere," he said.
Last week, at Microsoft's global partner conference, Inspire, Nadella and other executives unveiled a flood of enhancements to how the company will work with partners from now on.
[Related: The Top 10 Partner Takeaways From Microsoft Inspire]
The Redmond, Wash.-based software giant reported that net income more than doubled to $6.51 billion, or 83 cents per share, for its fiscal fourth quarter. That's compared with $3.1 billion, or 39 cents per share, in the year-ago quarter.
Revenue from Microsoft's intelligent cloud segment increased 11 percent during fiscal fourth quarter to $7.4 billion. That included Azure's near doubling of sales—97 percent growth—during the quarter.
"Their infrastructure roots have helped them become very competitive in the market and the plans they've committed to in terms of capital investment in global infrastructure," said Jeffrey Davis, chairman and CEO of St. Louis-based Perficient, No. 57 on the 2017 CRN Solution Provider 500. "In addition, because they have robust applications, and have openly partnered with other app vendors to stand up solutions in Azure, they also have greater breadth and depth to provide Tier 1 support to cloud customers compared to other cloud vendors."
Enterprise services saw a 3 percent revenue decline, partially offsetting the Azure gains for Microsoft.
Microsoft reported that its productivity and business processes segment generated the strongest growth during fiscal fourth quarter, with sales in the segment rising 21 percent to $8.4 billion. Dynamics 365 revenue jumped 74 percent, while Office 365 commercial revenue rose 43 percent. The company said its Office 365 business surpassed the traditional Office licensing business for the first time during the fiscal fourth quarter.
Microsoft's personal computing segment—its largest business—fell 2 percent during the quarter to $8.8 billion. That drop reflected the absence of phone revenue as well as a decline in Surface revenue of 2 percent—which Microsoft attributed to the timing of Surface product transitions. The company released a new Surface Pro tablet in June—the first update since fall 2015—meaning that only a small portion of the sales were counted in the fourth-quarter results. Microsoft also debuted the Surface Laptop in June.
The latest Surface devices "continue to build and create momentum for new Windows device categories," Nadella said during the earnings call.
The personal computing segment did have some bright spots during the quarter, in terms of Windows commercial products and cloud services (up 8 percent) and gaming revenue (up 3 percent). Windows OEM revenue rose 1 percent—"slightly ahead of the overall PC market," Microsoft noted.
For Microsoft's fiscal 2017 as a whole, sales reached $89.95 billion, up 5.4 percent from the company's $85.32 billion in revenue during fiscal 2016.
Net income rose significantly during the recent fiscal year to $21.2 billion, or $2.71 a share, from $16.79 billion, or $2.10 a share, during the prior fiscal year.
During Inspire, Microsoft said it's looking to accelerate the growth with a range of partner-friendly changes to its sales organization and improved incentives around partner programs such as the Cloud Solution Provider program.
Perficient's Davis said he views Microsoft's latest moves as "very strong" in terms of positioning the company to achieve partner-led growth going forward.
The company is "putting incentives and a channels organization in place that embrace and enable partners, and provide financial incentives for channel partners to drive Microsoft product revenue," Davis said.