Microsoft’s transformation into an enterprise cloud services company was underscored by full-year financial results that revealed total revenues of over $110 billion.
In Q4, the number of new Azure contracts worth more than $10 million doubled, and the cloud division showed an 89 percent year-on-year surge in revenues – twelve percent more than consensus analyst estimates.
Intelligent Cloud revenues were $9.6 billion in Q4, up 20 percent year on year, with full-year revenues standing at $32.2 billion, a 15 percent improvement on the division’s performance last year. Q4 server business revenues were up 24 percent, and enterprise services grew by seven percent.
Total revenues were $30 billion for the quarter, beating analyst expectations by $800 million. Q4 net income was $8.9 billion, up 10 percent from the year-ago quarter.
Microsoft’s full-year net income stood at $16.6 billion, 34 percent down year on year. However, this was due to a one-time charge of $13.7 billion from repatriating profits previously held overseas, under new US tax rules. With the charge stripped out, net income would have been one-third up on last year.
The global computer
Hailing the results, Microsoft CEO Satya Nadella described the Azure cloud platform as “the world’s computer”, adding, “Our early investments in the intelligent cloud and intelligent edge are paying off, and we will continue to expand our reach in large and growing markets with differentiated innovation.
“Our hybrid value proposition has continued to resonate, so there are a bunch of workloads that are migrating to the cloud. People are looking to lift and shift a lot of their data centre workloads.”
Nadella said he was proud of everything that the company had accomplished, and stressed once again that the enterprise shift to the cloud and to the IoT-critical edge environment stood at the core of the company’s transformation – and its healthy results.
“Everything we have accomplished this year has been about accelerating our lead in this new era and the tremendous opportunity ahead. We focused on the right secular technology trends and growing markets, and followed that up with solid roadmap execution.
We reorganised our engineering teams to break free of the categories of the past and better align with the emerging tech stack from silicon to AI to experiences, to better serve the needs of our customers today and long into the future.
“And, most importantly, we drove innovation to deliver differentiated value across the cloud and the edge.”
Azure everywhere
Azure is the “only hyper-scale cloud that extends to the edge across identity, data, application platform, security and management”, he claimed.
“We expanded our global data centre footprint to 54 regions, more than any other cloud provider, and with the most comprehensive compliance coverage in the industry.
“We added nearly 500 new Azure capabilities in the last year alone, focused on both existing workloads and new workloads, such as IoT and AI at the edge. And we introduced Azure Stack and Azure Sphere, two first-of-their kind cloud-to-edge solutions that are already seeing strong customer demand.
“We are democratising data science and AI with Azure Cognitive Services, Azure ML, and data services, such as Azure Cosmos DB, to help organisations of all sizes convert their data into insights and experiences for competitive advantage.”
Big partnerships
Earlier this week, Internet of Business reported that Walmart, the world’s biggest retailer and its largest company by revenue, had deepened its partnership with Microsoft in a new five-year deal.
Walmart will deploy Microsoft’s cloud technologies, including AI, machine learning, and Microsoft 365, across a range of functions, including purchasing algorithms, and sales data sharing and management.
The technology alliance is designed to help both companies fend off the threat from Amazon, which is not only advancing in retail, but also in cloud services, via AWS, and enterprise computing.
Another recent development was Microsoft’s announcement in June of the purchase of developer platform and community, GitHub. Of that deal, Nadella said, “With GitHub, we recognised the increasingly vital role that developers play in value creation and growth in the era of the intelligent cloud and intelligent edge.
“Our pending acquisition will enable us to bring our tools and services to new audiences, while enabling GitHub to grow and retain its independence and developer-first ethos and community.”
Internet of Business says
The “cloud and intelligent edge” message was threaded through Nadella’s earnings call to Wall Street analysts, and was even positioned as the driver behind the GitHub deal.
But another message has been noticeable from Microsoft in recent months: trust. Microsoft has gone out of its way to reposition itself as a trusted partner, both for organisations and for customers’ and citizens’ private data.
That message is not surprising, perhaps, as Microsoft focuses on the cloud and edge services, because trust is critical to the on-demand world – especially as Microsoft has not always been seen as a safe pair of hands. Indeed, it has often been regarded as pushy and interfering, forcing users towards upgrades and new products, while syphoning sales messages into their private channels, via platforms such as LinkedIn (revenues from which are also booming).
Nadella – a far more subtle and intelligent CEO than his noisy, aggressive predecessor – seems to recognise that the connected age demands a better, more sophisticated approach. For example, Microsoft’s detailed support for GDPR and similar data protection regulations positions it alongside Apple, Salesforce.com, Box, SugarCRM, and others, and against rivals such as Amazon and Google, for whom customer data is their core business.
It’s hard to imagine former CEO Steve Ballmer making the same move, as he stomped the world stage like an 800-pound gorilla, even as Google and Apple walked off with the mobile market on his watch.
“With this tremendous opportunity comes great responsibility,” said Nadella, perhaps echoing another Web slinger, this time from the Marvel universe. “We’re relentlessly working to instil trust in technology across everything we do. It’s why we will continue to lead the industry dialogue on trust, advocate for customer privacy, drive industry-wide cybersecurity initiatives, and champion ethical AI.”
The fragility of modern consumer trust was revealed in the recent controversy over aggressive US immigration practices, where Microsoft found itself on the receiving end of social media rage over its relationship with the US Immigration and Customs Enforcement agency (ICE).
As every business decision seems to be politicised in the US at present – as trade disputes grow and companies’ overseas alliances are called into question by government agencies – Silicon Valley’s growing message about ethical behaviour and corporate responsibility may become increasingly resonant – but also more closely examined for inconsistencies.