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Azure Remains Key to Microsoft’s Future

Key to future
Microsoft's Satya Nadella

Microsoft’s Satya Nadella

By Jeffrey Burt

Microsoft officials are seeing the Azure public cloud business continue to grow into a key revenue engine for the company.

In the most recent quarter, Microsoft’s Intelligent Cloud unit — which includes not only Azure but also other cloud-related offerings — saw a 22% increase in revenue, to $9.7 billion from the same three months last year. Azure itself drove a 73% increase in revenue in the company’s fiscal third quarter, a significant jump though a bit smaller than the 76% year-over-year increase in the previous quarter.

Overall, Microsoft’s quarterly revenue hit $30.6 billion, 14% more than a year ago.

Azure’s growth is an indication of its importance to Microsoft’s overall business and the direction company officials need it to go as they look to chip away at Amazon Web Services’ (AWS) dominant market share. The Azure results also are indicative of the growth of the public cloud market in general and Microsoft — like AWS, Google Cloud Platform and other providers — is benefitting as enterprises embrace multicloud and hybrid cloud strategies.

Gartner analysts are predicting that worldwide, the public cloud market will reach $214.3 billion this year, a 17.5% increase over the $182.4 billion last year.

During a conference call this week to discuss the quarterly numbers, Microsoft CEO Satya Nadella said that a differentiated approach to the cloud is helping to drive Azure’s business.

“Our architectural advantage is a clear reason for our success,” Nadella said. “Azure is the only true hybrid, hyperscale cloud that extends to the edge. Operational sovereignty is increasingly critical to customers, and Azure uniquely provides consistency across development environments, operating models and technology stacks — whether connected or disconnected to the public cloud.”

Microsoft's Amy Hood

Microsoft’s Amy Hood

During the same call, Amy Hood, senior vice president and CFO, said that for Azure, the company expects “’continued strong growth in our consumption-based business and moderating growth in our per-user business given the increasing size of the installed base.”

Whether it will change how the market sits now is still to be seen. AWS, Google Cloud and other providers like IBM Cloud, Alibaba and Oracle Cloud are also feeling the benefits of such a fast-growing space. Analysts at Synergy Research Group in February said that AWS in the fourth quarter 2018 slightly increased it market share to almost 35%, more than the next four combined.

Cloud providers also are maneuvering to get on both sides of the hybrid cloud trend. Not only are they offering access to services on their public clouds, but they’re also now enabling customers to bring those services on-premises. One way AWS is doing this is through its Outposts appliances that bring AWS hardware and services to enterprise data centers and easy connectivity into the AWS cloud. Google Cloud…

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