Microsoft reported that revenues from its “Intelligent Cloud” business increased 14 percent year-over-year to $6.9 billion during the quarter. Microsoft’s IC business accounted for 28 percent of the company’s overall $24.5 billion in revenues for the quarter.
Microsoft’s cloud business includes its Azure cloud computing service, Office 365 workplace software, Dynamics 365 database, and other professional services.
The Azure platform showed a slight drop in year-over-year growth, but still managed to post a 90 percent increase from last year.
Microsoft CEO Satya Nadella told investors that the company expanded its data center reach in support of its Azure platform to 42 regions around the world. He noted this was more than any other cloud provider.
Microsoft’s commercial cloud business also hit a $20.4 billion annualized revenue run rate during the quarter. The run rate is based on its best monthly revenue performance during the quarter and multiplying it by 12.
During its Q4 2017 financial release, Microsoft stated it had hit an $18.9 billion run rate during that quarter.
Investors were impressed with the latest results, with Microsoft’s stock trading up more than 7 percent early Friday. The stock price at one point this morning hit a new 52-week high of $86.19 per share.
Microsoft remains a distant second to Amazon Web Services (AWS) in terms of cloud market share, but has been showing robust gains.
A recent Synergy Research Group report noted AWS controlled 34 percent of the global market share at the mid-year mark. Microsoft was a distant No. 2 with 11 percent market share, ahead of IBM (8 percent) and Google (5 percent).
The research firm did note that the four largest players managed to maintain or grow their market share during Q2.
“For me the biggest story is that Amazon/AWS is holding on to its market share despite increasingly strong competition from a handful of big and aggressive competitors,” said Synergy analyst John Dinsdale in an email about the results. “Microsoft, Google, and Alibaba are all growing their cloud revenues at impressive rates, but AWS keeps on growing by over 40 percent, per year, despite its huge scale. That is a really difficult feat to pull off.”
More significantly for Microsoft, a recent “State of the Cloud Report” from RightScale found that AWS’ public cloud adoption was basically flat between 2016 and 2017. Microsoft’s results showed an increase from 20 percent adoption in 2016, to 34 percent adoption in 2017.
Microsoft also recently launched a cloud service map comparing platform features between Azure and AWS. The map allows for planning a multi-cloud environment or planning for customers looking to migrate from AWS to Azure.
Microsoft said it expects its IC business to post between $7.35 billion and $7.55 billion in revenues for its fiscal Q2. It also expects another quarter of double-digit revenue growth across its server products and cloud services.
Analysts aligned with those expectations.
“Consistent with our prior comments, we remain bullish on Azure’s growth opportunities driven by continued customer and new workload adoption rates,” said BMO Capital Markets software analyst Keith Bachman in a research report.