Microsoft’s 12% YoY Q1 revenue growth drove by people having to stay indoors: remote work, more gaming, and remote conversation. A major contributing factor this quarter (July-September) was growth in commercial cloud, which crossed $15 billion in revenue, up by a third year-on-year. “The next decade of economic performance for every business will be defined by the speed of their digital transformation,” CEO Satya Nadella declared.
Cloud: Azure grows 48%, Intelligent Cloud segment sees highest growth
Azure revenue grew at 48% YoY, driven by growth in consumption-based business. “This quarter, we saw better than expected growth in our per-user enterprise mobility business as the installed base increased 27% to 152 million seats,” the company said. The broader category that Azure sits inside is Intelligent Cloud reported $13 billion in revenue, up 20% year-on-year. This segment includes GitHub, Enterprises Services, SQL and Windows Server. It was also the highest growth segment for the company, with the others being Productivity and Business Processes (includes LinkedIn and Office365) and More Personal Computing (includes Windows and Xbox). The former grew 11% YoY and the latter grew 6% YoY.
The way I think about the computing landscape going forward is if you sort of said at the highest of levels today as a percentage of GDP, tech spend is 5%. We think it will double in the next 10 years. And if anything, this pandemic perhaps has accelerated that doubling. And in that context, what’s the large — the most secular need, it’s the need for distributed cloud infrastructure. It’s both needed for modernizing existing applications you have, and so that’s why — by the way, 20% penetrated, so there’s more 80% that needs to move. But more importantly, there’s going to be new application starts which need infrastructure. And so, if you sort of add those up, I think that we’re still in early innings. – Nadella
- Office commercial products and cloud services revenue increased 9%, driven by Office365 commercial revenue growth of 12%
- Office Consumer products and cloud services revenue increased 13%,
- Microsoft 365 Consumer subscribers increased to 45.3 million
- Revenue in Intelligent Cloud was $13.0 billion and increased 20%: Server products and cloud services revenue increased 22% (up 21% in constant currency) driven by Azure revenue growth of 48%
Azure has over 66 data centres including in new regions in Austria, Brazil, Greece, and Taiwan. 1 million SQL databases have been migrated to Azure so far, with over 1.4 trillion customer queries processed each day. Microsoft Cloud for Healthcare, the company’s first industry-specific cloud, will become generally available later this week. It integrates “healthcare-specific capabilities” including from Dynamics 365, Microsoft 365, Power Platform, and Azure.
365 and Xbox
Microsoft 365 consumer subscriptions increased to 45.3 million subscribers, an increase of 27% YoY. Office consumer products and cloud services revenue grew 13% YoY. Revenue from Xbox content and services increased 31% YoY, driven by third-party titles, XBox Game Pass subscriptions, and first-party titles. In early November, Microsoft will launch its next-gen Xbox Series X and Series S consoles.
Record engagement on LinkedIn
LinkedIn saw “record levels of engagement again this quarter”, with revenue growth of 16% YoY, driven by a stronger advertising market. Nadella also revealed today that LinkedIn now has 722 million users (did not mention whether these are monthly/daily users or registered users) and 40 million job seekers. The company has moved to redesign the platform, improve search, messaging, and introduce [sigh] Stories.
Advertiser demand on LinkedIn returned to near pre-COVID levels, up 40% year-over-year. 1 million hours of content is streamed on LinkedIn Learning every week, more than double the amount a year ago.
Teams daily users grew 50% since April
Teams has doubled its daily active users to 115 million as of Q1, from just 75 million in April. Teams is based on Office365 chat-based work tool that compete with Slack, Google Meet, and Zoom. Over the past six months, the company has added over a hundred features to Teams, including breakout rooms, meeting recaps, shift scheduling, and large scale digital events up to 20,000 participants. Teams also has “virtual commute” and Headspace meditation. Microsoft 365 users generated more than 30 billion collaboration minutes in a single day this quarter. Nearly 270,000 educational institutions are using Teams.
Though Teams has multiple services on offer, including chat, meetings, collabs, and business process applications, integration with Microsoft365 also helps. “Teams is bolstering all-up growth, right, because meetings are important but they’re transactional. Work happens before meetings, during meetings and after meetings. So, that ability to have the workflow completely stitched together is where Microsoft 365 really stands out,” Nadella said.