Microsoft might be No. 2 in the worldwide cloud market, but that segment was the lead headline in the company’s latest quarterly results. The computing giant posted robust cloud revenue growth in both its Intelligent Cloud business and its commercial cloud operations. (Microsoft CEO Satya Nadella has described its Intelligent Cloud platform as its push to integrate artificial intelligence (AI) into all of its applications and services.)
Until then, Microsoft can bask in the 23-percent year-over-year surge in revenues from its Intelligent Cloud business that came in at $9.6 billion for the latest quarter. And it can also feel good about the 53-percent increase in its commercial cloud services revenue to $6.9 billion for the latest quarter.
A recent Synergy Research Group report ranked Microsoft as the No. 2 worldwide cloud provider in revenues during the first quarter of this year. That ranking included revenues from infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS) operations.
Microsoft held onto the No. 2 position in every region except for Asia-Pacific (APAC) where local Chinese cloud provider Alibaba held the second position. AWS led in all five regions.
During the first quarter of the year, Amazon reported that its AWS business generated $5.4 billion in revenue, up 49 percent compared to the same quarter last year. Google didn’t break out specific revenues tied to its cloud business, but did say that it had reached a $1 billion per quarter run rate.
Getting back to its latest results, Microsoft’s Intelligent Cloud results came in ahead of analyst forecasts of around $9.1 billion. Specific to that business was a 26-percent increase in revenues for its server products and cloud services that were bolstered by an 89-percent increase in Azure revenue growth.
Microsoft’s commercial cloud revenues also came in ahead of forecasts, with company management citing strong growth across the U.S., Western Europe, and the U.K.
Microsoft CFO Amy Hood told investors on an its earnings call that the company scored a record number of multimillion-dollar commercial cloud agreements for the full fiscal year. It also doubled the number of $10 million-plus Azure agreements and expects continued gross margin gains.
“The rate of improvement will moderate relative to [fiscal year 2018] as revenue mix continues to shift to Azure IaaS and PaaS consumption-based services, and we realize less year-over-year improvement in our per-user services,” Hood explained. “We will continue to increase our investments in CapEx to meet the growing demand for our cloud services, although we do expect the growth rate for the year to moderate.”
Analysts echoed that sentiment.
“We think Azure will continue to deliver very strong growth rates with improving margins,” noted BMO Capital Markets Analyst Keith Bachman in a research note.
Investors were also happy with the results, as Microsoft’s stock surged to a new 52-week high of $108.20 per share early Friday.
During its most recent quarter, Microsoft also announced plans to acquire development platform GitHub for $7.5 billion. The move better positions the software giant’s presence with developers.
Microsoft earlier this year also bolstered the positioning of its cloud services within the organization. That move included the formation of two new business groups, with one enveloping its cloud and AI operations.