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Microsoft CEO Satya Nadella On ‘The New Growth Engines,’ Teams Innovations And Recession Concerns

Wade Tyler Millward

‘I don’t hear of businesses looking to their IT budgets or digital transformation projects as the place for cuts,’ Microsoft CEO Satya Nadella said Tuesday on the company’s earnings call.

Microsoft reported a better-than-expected third fiscal quarter this week, with CEO Satya Nadella calling several products “new growth engines” for the company and predicting that IT budgets and digital transformation projects withstand a potential recession this year.

“If there is any macro headwind where you have more value for less price means you win,” Nadella said on the company’s earnings call Tuesday for the quarter that ended March 31. “And in our case, when it comes to our commercial cloud offerings, we have significant advantages on that across the stack.”

Nadella continued: “In the conversations we’re having with our customers, the interesting thing I find from perhaps even past challenges – whether macro or micro – is I don’t hear of businesses looking to their IT budgets or digital transformation projects as the place for cuts. If anything, some of these projects are the way they’re going to accelerate their transformation or, for that matter – automation, for example. I have not seen this level of demand for automation technology to improve productivity, because in an inflationary environment, the only deflationary force is software.”

[RELATED: Microsoft Earnings: Slow Partner Program Change Adoption Ate Into On-Premises Revenue ]

Multiple investment banks issued reports Wednesday praising the Redmond, Wash.-based company’s performance during the quarter.

“Looking forward, the core secular growth drivers sustaining Microsoft’s growth remain firmly in place,” according to a report Wednesday by New York-based investment bank Morgan Stanley.

However, the Morgan Stanley report also said to keep an eye on an issue with Open Licensing raised by Microsoft during the Tuesday earnings call.

Morgan Stanley said to watch for issues in transitioning partners and customers from Open Licensing or even a possible weakening in on-premises transactional licensing revenue.

The report said to also watch for effects on Microsoft from COVID-19 shutdowns in China and the war in Ukraine, among other possible headwinds.

On the Tuesday call, Microsoft executives identified a $130 million hit to operating income due to stopping sales in Russia over the country’s invasion of Ukraine.

Microsoft Chief Financial Officer Amy Hood expects the war in Ukraine to have a $110 million hit on revenue in the current quarter.

Here’s what else Nadella had to say about the quarter.

 
Wade Tyler Millward

Wade Tyler Millward is an associate editor covering cloud computing and the channel partner programs of Microsoft, IBM, Red Hat, Oracle, Salesforce, Citrix and other cloud vendors. He can be reached at wmillward@thechannelcompany.com.

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