Microsoft's got its head in the clouds: Turns out when we all have to work from home, remote platforms make bank

Azure revenue up 48 per cent, pretty much everything Redmond makes is up


Microsoft on Tuesday reported $37.2bn in revenue for the first quarter of its fiscal 2021, an increase of 12 per cent year over year and more than investors had anticipated.

In terms of diluted earnings per share, that translates to $1.82, an increase of 32 per cent year over year. Financial analysts on average expected revenue of $35.72bn and earnings per share amounting to $1.54.

In a statement, Microsoft chief executive officer Satya Nadella said economic performance for businesses over the next decade "will be defined by the speed of their digital transformation," a forecast that perhaps oversimplifies the criteria for commercial success but at least argues for the purchase of Microsoft products and services.

Nadella made that pitch more directly in remarks on Microsoft's conference call for investors. "In a world of uncertainty and constraints, every person and every organization needs more digital technology to recover and reimagine what comes next," he said.

Chief financial officer Amy Hood at least offered an observation germane to Microsoft's quarterly bonanza: "Demand for our cloud offerings drove a strong start to the fiscal year with our commercial cloud revenue generating $15.2bn, up 31 per cent year over year."

The global COVID-19 pandemic, which has encouraged businesses to invest in online services, may have something to do with Azure's greater-than-expected popularity.

Here's a snapshot of Microsoft's Q1 FY21, the three months to September 30:

  • Total revenues of $37.2bn: Up 12 per cent year over year.
  • Operating income of $15.9bn: A big jump of 25 per cent year over year.
  • Net income of $13.9bn: Up a whopping 30 per cent from this time last year.
  • Diluted earnings per share of $1.82: Up 32 per cent, reflecting increased profits.
  • Operating expenses of $10.3b: A more modest 3 per cent rise.

Microsoft's Productivity and Business Process group delivered $12.3bn, an 11 per cent year over year increase. That breaks down as follows:

  • Office Commercial products and cloud services revenue rose by 9 per cent, led by Office 365 Commercial sales growth of 21 per cent.
  • Office Consumer products and cloud services saw a 13 per cent sales surge as Microsoft 365 Consumer subscribers rose to 45.3 million paying customers.
  • LinkedIn somehow managed to grow its revenue by 16 per cent.
  • Dynamics products and cloud services revenue grew 19 per cent, largely on the strength of Dynamics 365 sales growth of 38 per cent.

Redmond's Intelligent Cloud group managed to bring in $13bn, an increase of 20 per cent. Server products and cloud services revenue rose 22 per cent year on year, led by Azure, which saw 48 per cent revenue growth.

In the More Personal Computing segment, revenue hit $11.8bn, an increase of merely 6 per cent. The segment had both ups and downs:

  • Windows OEM revenue fell 5 per cent year over year as Redmond's PC licensing business declined as with long-term trends .
  • Windows Commercial products and cloud services revenue went up 13 per cent.
  • Xbox content and services revenue surged, increasing 30 per cent year over year.
  • Surface revenue also did well, rising 37 per cent year over year, helped by updated product lines.
  • Search advertising revenue, excluding traffic acquisition costs, dropped 10 per cent - looks like Bing is still having problems.

On Microsoft's conference call, Nadella recounted various product highlights. He touted Microsoft's recently announced partnership with C3.ai and Adobe to deliver industry-specific CRM products based on Dynamics 365. And he said the company's first industry-specific cloud – the Microsoft Cloud for Healthcare – will be available later this week.

He also celebrated Microsoft's security capabilities. "We are the only company that offers capabilities to protect and manage data, devices, identities, and infrastructure holistically, enabling a cross-platform and multi-cloud Zero Trust security architecture," he said.

Despite that claim, it does seem that there are other companies capable of protecting and managing data, devices, identities, and infrastructure holistically – in a way that considers the whole ecosystem. But such quibbles matter little when Microsoft is minting money for investors. ®


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