Microsoft cloud revenue surges 39% in fourth quarter
Microsoft experienced a record fiscal year, reporting revenue of $33.7 billion and net income of $13.2 billion. Q4 showed that commercial cloud revenue increased 39% year-over-year to $11.0 billion, which, according to Microsoft CFO Amy Hood, represents the strongest commercial quarter ever.
Microsoft’s commercial cloud business surpassed $38 billion in revenue for the year, with gross margin expanding to 63%, driven mostly by Azure, Microsoft’s cloud computing service, which Hood said has been the subject of increased focus for the company.
“We were having more conversations across organizations around Azure and rethinking their digital transformation plans with us,” Hood said on the investor’s call. “We were also seeing extensions take place of prior commitments in Office 365 to again be longer and include the Azure contract. When that happens, it’s almost like you’re adding new product and new value.”
Microsoft CEO Satya Nadella referenced cloud computing’s role in Microsoft’s strong quarter, as well, saying, “We have 54 data center regions, more than any other cloud provider, and we were the first in the Middle East and in Africa.”
Nadella also suggested that Microsoft’s true secret to success is the cloud partnerships it establishes in a variety of industries, claiming that this record fiscal year is “a result of [Microsoft’s] deep partnerships with leading companies in every industry.”
Yesterday, in fact, Microsoft entered an agreement with Indian mobile network operator Reliance Jio Infocomm Limited to accelerate the digital transformation of the Indian economy. As part of the agreement, Jio will migrate its non-network applications to the Azure cloud platform, leveraging the platform to develop innovative cloud solutions focused on the needs of Indian businesses.
And AT&T recently selected Microsoft’s cloud in one of the tech company’s biggest cloud commitments to-date.
Company gross margin percentage was 69%, up 2 points year-over-year and ahead of expectations driven by sales mix shift to commercial licensing and OEM, and capital expenditures including finance leases were up sequentially to $5.3 billion driven by ongoing investment to meet demand for cloud services.
While gaming revenue declined 10% and 8% in constant currency driven by lower console sales and monetization across third party titles, Microsoft confirmed its intentions to continuing investing in cloud gaming. “We are investing to empower the world’s two billion gamers to play the games they want, with anyone, anywhere on any device with our new game streaming service, Project xCloud,” Nadella stated.
He said to expect Project xCloud trials this fall.
