Microsoft CEO Nadella: Azure Is 'Only Hyperscale Cloud That Extends To The Edge'


Microsoft CEO Satya Nadella is out to show off a wide array of differentiators for Azure from the public cloud competition, including in areas such as hybrid where he says the company is "leading."

Nadella didn't mention the major public cloud competitors, Amazon Web Services and Google Cloud Platform, by name. But a growing number of top-tier customers "are recognizing the architectural advantage of a consistent computing stack from the cloud to the edge," Nadella said during Microsoft's quarterly earnings call with analysts Wednesday, as the company announced that Azure revenue surged 76 percent during the first quarter of fiscal 2019, ended Sept. 30.

[Related: Satya Nadella's 5 Boldest Statements At Microsoft Ignite 2018]

"Azure is the only hyperscale cloud that extends to the edge across identity, data, application platform, as well as security and management," Nadella said. "We introduced 100 new Azure capabilities this quarter alone, focused on both existing workloads like security and new workloads like IoT and edge AI."

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Nadella cited newly introduced solutions including Azure Confidential Computing, which he said makes Azure "the first cloud to provide a secure platform for protecting the confidentiality and the integrity of data while in use."

In IoT and edge, Nadella pointed to the traction for Azure Sphere—a solution for securing microcontroller unit (MCU) devices that recently moved into broad availability and is "seeing strong customer interest," Nadella said during the quarterly call.

Overall for the first fiscal quarter, Microsoft announced that revenue climbed 18.5 percent to reach $29.08 billion, up from $24.54 billion during the same period a year earlier. The Redmond, Wash.-based company is "off to a very strong start" in fiscal 2019, Nadella said.

The Azure results helped to drive quarterly revenue of $8.57 billion in Microsoft's intelligent cloud segment, up 24 percent from $6.92 billion the year before.

In part, the momentum can be attributed to Microsoft's "architectural technology advantage around hybrid," Nadella said.

"We don't think of hybrid as some stopgap in the move to the cloud. We think about it as the coming together of distributed computing, where the cloud and the edge work together--for not just for the old workloads, but most importantly for new workloads," Nadella said. "This is a place where we're leading."

Meanwhile, Microsoft's productivity and business processes segment rose 19 percent year-over-year to $9.77 billion during the fiscal first quarter, from $8.24 billion.

Office 365 commercial revenue rose 36 percent, while Dynamics 365 spiked by 51 percent and LinkedIn was up 33 percent during the company's fiscal Q1.

As with Azure, Nadella said that Microsoft has an "architectural advantage" with Dynamics 365, the company's combination cloud CRP and ERM system.

"It's much more modular, it's modern, it's extensible with [the Microsoft] Power Platform," Nadella said during the quarterly call. "That gives us the ability to do things for customers and serve them in ways that are very differentiated."

In Microsoft's more-traditional PC-related business, the company also enjoyed solid growth during the first quarter of fiscal 2019. Revenue in Microsoft's personal computing segment climbed 15 percent to $10.75 billion during the quarter, from $9.38 billion the year before.

The biggest growth in the category came from gaming revenue, which jumped 44 percent. Surface drove revenue gains of 14 percent, thanks in part to the launch of the affordably priced Surface Go tablet in August. Windows OEM revenue also increased, by 3 percent, while Windows commercial products and cloud services climbed 12 percent.

Net income for Microsoft during the quarter reached $8.82 billion, or $1.14 per diluted share, up from $6.58 billion, or 84 cents per diluted share, during the same period a year earlier.

Partners in Microsoft's Cloud Solution Provider (CSP) program have increasingly been driving strong results for the company, Microsoft Channel Chief Gavriella Schuster said previously. The CSP growth, in areas such as Azure and Office 365, generated revenue gains of 234 percent during fiscal 2018 from a year earlier, Schuster said in July.

Michael Lomonaco, director of marketing and communications for Grand Rapids, Mich.-based solution provider OST, said CSP is a "fantastic" program.

"They've done a great job listening for feedback and evolving it," Lomonaco said. "I definitely have to hand it to Microsoft--the CSP program is a great program. And at OST we are definitely benefiting from it, and more importantly our customers are really benefiting from it."