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Microsoft Azure Helps Cloud Sales Pass $20B Milestone

‘The case for digital transformation has never been more urgent or more clear,’ Microsoft CEO Satya Nadella said during the call for the company’s first quarter of the fiscal year. ‘Digital technology is a deflationary force in an inflationary economy. Businesses small and large can improve productivity and the affordability of their products and services by building tech intensity.’

Microsoft’s cloud quarterly sales passed $20 billion for the first time, CEO Satya Nadella told listeners on an earnings call Tuesday. The $20.7 billion in sales for Microsoft Cloud, which includes Azure, Dynamics 365, Microsoft 365, GitHub and Power Platform, means the tech giant ended its first quarter of the new fiscal year with a 36 percent increase year over year in cloud sales.

“The case for digital transformation has never been more urgent or more clear,” Nadella said during the call for the company’s first quarter of the fiscal year. “Digital technology is a deflationary force in an inflationary economy. Businesses small and large can improve productivity and the affordability of their products and services by building tech intensity.”

Nadella shared multiple milestones across the Redmond, Wash.-based tech giant’s product suite.

For Microsoft 365 (M365), 138 organizations now have more than 100,000 Teams users. More than 3,000 organizations have more than 10,000 users.

“We are innovating to empower people to have impact from home, in the office and anywhere in between,” Nadella said. “Microsoft Teams is the only solution that supports all the ways people work. Usage has never been higher.”

The number of companies using Teams as a phone solution has also increased, Nadella said. Calls originating from Teams chats increased 50 percent year over year. Companies including SAP and Schlumberger use Teams phone-related services.

“The rise of hybrid work is transforming the enterprise phone market and we are taking share across PSTN [public switched telephone network] and VoIP,” Nadella said.

Users turning to Teams as a deployment platform for apps is also on the rise, with Microsoft seeing an 82 percent increase year over year in the number of organizations with more than 10,000 users integrating third-party and line-of-business apps with Teams, he said. In one example, NTT Data uses ServiceNow applications within Teams while retail businesses build apps in Power Platform for Teams to allow for curbside pickup of products.

Frontline use of Teams more than doubled year over year, Nadella said.  

GitHub reached 73 million developers, double the number of three years ago when Microsoft bought the open-source code repository for $7.5 billion. Microsoft introduced more than 70 enterprise features to GitHub.

Power Platform has nearly 20 million monthly active users, up 76 percent year over year, Nadella said. He called Power Apps “the undisputed market leader in low-code, no-code tools” due to its 10 million monthly active users, with 129 organizations, including 3M, Sony and EY, counting more than 10,000 users each.

Dynamics 365 increased the number of “customer profiles” 174 percent year over year, Nadella said, without specifying the user count.  

Nadella said the “Great Reshuffle” of people quitting jobs and changing careers has benefited LinkedIn, which now numbers nearly 800 million members. Confirmed hires on the platform increased more than 160 percent year over year, he said. The business-oriented social media network’s Learning feature has more than 15,000 enterprise customers.

All told, the “productivity and business processes segment” of Microsoft’s business, which includes Office, Teams, LinkedIn, Dynamics and Power Platform, saw sales of $15 billion for the quarter, up 22 percent year over year.

LinkedIn grew the most at 42 percent. Office 365 Commercial sales grew 23 percent. And Dynamics 365 sales grew 48 percent.

Tanaz Choudhury, CEO of Houston-based Microsoft partner TanChes Global Management, said her company still sees demand for work related to remote working even as the country approaches two years since the start of the COVID-19 pandemic.

TanChes Global Management is targeting 20 percent to 30 percent year-over-year growth for 2022, she said, marking the fourth successive year of growth.

“Cloud services will continue to be a conversation,” Choudhury said. “It’s not a surprise anymore for anyone. Nobody questions the need or the use case scenario anymore. It’s just a matter of, ‘Hey, what does the implementation plan look like?’”

 

Azure ‘The World’s Computer’  

Microsoft’s “intelligent cloud” segment--which includes Azure, SQL Server, Windows Server, GitHub, Visual Studio and Microsoft’s consulting services--saw sales of $17 billion during the quarter, up 31 percent year over year. Azure “and other cloud services” grew 50 percent, according to Microsoft.

Milestones in this business segment include Azure Synapse now in use by thousands of active Power BI customers, Nadella said.  

“Every organization will need a distributed computing fabric across the cloud and the edge to rapidly build, manage and deploy applications anywhere,” Nadella said. “We are building Azure as the world’s computer with more data center regions than any other provider delivering fast access to cloud services while addressing critical data residency requirements.”

 

Cybersecurity ‘No. 1 Threat Facing Businesses’

Microsoft prevented 70 billion attacks over the past year, Nadella told listeners, through the daily analysis of 24 trillion signals across email, endpoints and identities.

Nearly 650,000 customers use Microsoft’s security solutions, Nadella said, an increase of 50 percent year over year. Azure Active Directory has more than 500 million monthly active users, with the third-party application use up one and a half times year over year.

As a sign of the popularity of passwordless logins, Nadella said that nearly 240 million users use the security feature.  

“Cybersecurity is the No. 1 threat facing businesses today,” Nadella said. “Our goal is to help every organization strengthen its defense through the zero-trust architecture built on end-to-end solutions that span all clouds and all platforms.”

 

Unexpected Windows Performance

Nadella spoke positively about the performance of the recently released Windows 11 operating system without providing too many details.

“There has been a structural shift in PC demand emerging from this pandemic and we’re delighted with the early response to Windows 11,” he said.

One analyst on the earnings call commented that Windows’ OEM numbers “blew away” the company’s earlier guidance. Microsoft CFO Amy Hood attributed the results to the growth of hybrid work despite global supply chain constraints.

 

What The Future Holds

Hood told listeners to expect Microsoft to close its acquisition of voice-to-text software provider Nuance by the end of the second quarter or early in the third quarter. Hood told listeners she expects sales of $50.15 billion to $51.05 billion in the second fiscal quarter.  

Notably, she told analysts to expect a Surface sales decline of less than 10 percent “as we continue to work through supply chain uncertainty, particularly in our premium devices.”

Microsoft reported total sales for the first quarter of the fiscal year ended Sept. 30 of $45.3 billion, a 22 percent increase year over year.

Microsoft’s stock traded at $316.30 after hours, up more than 6 percent.

 

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