All Attention to Microsoft’s Azure, Cloud Computing in Q1 FY’23


Credit: ZDNET

More than half of them Microsoft’s $50.1 billion in revenue ($25.7 billion) for Q1 FY’23 came from “Microsoft Cloud”. But Wall Street wasn’t pleased with Azure’s 35 percent year-over-year growth in the quarter, as well as predictions that Azure revenue would decline five points in a row in the second quarter.

(Microsoft Cloud, formerly known as Microsoft Commercial Cloud, is a group of services created by a company that includes Microsoft 365/Office 365, Azure, Dynamics, several LinkedIn services, and cloud services focused on other businesses.)

But Azure and Microsoft Cloud look good compared to what’s happening in the “More Personal Computer” segment – Windows, Xbox and games, and Search/Ads. Windows OEM revenue fell 15% in the quarter. And for Q2, Chief Financial Officer Amy Hood said to expect Windows license revenue to fall further – in the high 30% range – especially compared to the previous year. She said device sales will also drop about 30% next quarter, in line with the PC market.

Officials said the projected $800 million increase in energy costs for fiscal year 23 contributed to a 14 percent drop in net income, to $17.6 billion, or $2. $35 per share and reduces Azure margins. But inflation and a strong dollar also contributed largely to the drop, as Microsoft generates nearly half of its revenue from overseas sales.

Hood emphasized that Microsoft is continuing to make large and long-term deals for Azure. Microsoft 365 / Office 365 Dynamics sales surged during the quarter. Microsoft’s most expensive and feature-rich Microsoft 365 plan, E5, 12% of the total mix last quarter. Microsoft didn’t provide an update on E5 growth, except that more than half of the $10 million Microsoft 365 pre-orders for the quarter came from E5. Hood said that Microsoft has been adding more functionality to its E3 SKUs, but the company needs to do even better at enhancing the value of E3.

“In this environment, it’s more important than ever to continue to invest in our strategic growth markets like Cloud, security, Teams, Dynamics 365, and LinkedIn, where we have the opportunity to continue to grow. continue to share as we deliver problem-solving innovations to our customers,” said Hood.

Some of the other stats Microsoft released during its fiscal 23rd Q1 call are worth noting:

  • The company says it has 8,500 customers managing the Azure Arc mix, twice as many as a year ago.
  • GibHub currently generates $1 billion in annual recurring revenue, four years after Microsoft acquired the company. Microsoft says more than 90 million developers are using the service.
  • Power Apps has nearly 15 million monthly active users, up 50% from a year ago. Microsoft says Power Automate has more than 7 million monthly active users.
  • Microsoft Viva has over 20 million monthly active users.
  • Netflix is ​​coming November ad-supported subscription, powered by Microsoft’s advertising platform.
  • PC Game Pass subscriptions grew 159% year-over-year, and Xbox hardware revenue grew 13%. Xbox content and services are down 3%.
  • Headcount growth from Q1 to Q2 will be minimal, with plans to move people around to focus on the company’s top priorities.

Microsoft implemented some adjustments to the way revenue is reported in September. HoloLens revenue now belongs to the More Personal Computing segment, not the Intelligent Cloud segment, reflecting a reorganization that has seen Team HoloLens split into two. Microsoft also added PC accessories, along with HoloLens, to the Surface revenue growth metric, now known as “Device revenue growth.” GitHub cloud revenue has been removed from Server for Azure products and now counts towards “Microsoft Cloud” totals. And Windows 365 revenue is also part of Azure instead of commercial Windows.

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