Dive Brief:
- Microsoft announced better-than-expected fourth quarter and year-end earnings on Thursday. Azure cloud revenue increased 97% year over year, according to CNBC. Microsoft's commercial cloud annualized run rate is now at $18.9 billion.
- The company did very well overall as well, earning non-GAAP revenue of $24.7 billion for the fourth quarter. Wall Street had predicted revenues of around $24.3 billion. Non-GAAP revenue for the full fiscal year was $96.7 billion.
- Other parts of the company that fared well: Microsoft's Dynamics 365 revenue was up 74%, commercial Office 365 revenue went up 43%, and the Productivity and Business Processes segment, which includes LinkedIn, was up 21%. The personal computing and phone segments were rare weak spots.
Dive Insight:
Microsoft appears to be making a come-from-behind bid for a bigger slice of the cloud market. Amazon Web Services has yet to report its latest quarterly earnings, but last quarter showed Azure outpacing AWS. While Microsoft Azure grew 93% year-over-year in the first quarter of 2017, Amazon Web Services (AWS) grew 43% during the same period.
But at the same time business is booming, Microsoft is also laying off employees. Earlier this month, the company announced plans to cut 3,000 sales jobs, part of a move to reorganize its global sales operation around the cloud.
It’s clearly all about cloud now, so it’s not surprising Microsoft wants to focus there. Experts say Microsoft is excelling in two specific areas: hybrid deployment and cloud migration. In the area of cloud migration, the company is successfully using Office 365 to help lead companies into the cloud. With vendor loyalty playing a part, if a customer is pleased with Microsoft's services, it might be inclined to stick with its other products.
Whatever it's doing, Microsoft is clearly doing something right. While other legacy tech companies like Intel, Cisco and IBM struggle, Microsoft seems to have figured out how to shift its services fast enough to attract new customers and keep business growing steadily.
The question now is, given Microsoft's cloud momentum, will it finally start to close in on AWS' lead?
