Microsoft Generates More Money From Cloud Than Windows

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Nadella’s legacy. Revenues from the cloud overtake sales from Windows for the first time ever at Microsoft

Microsoft continues to please its investors as it recorded increases in cloud, Surface and Windows revenues in its latest financials, but xBox sales disappoint.

And for the first time ever Microsoft cloud unit generated more revenues than Redmond’s traditional Windows and Office segments.

There is little doubt that this achievement is the main legacy of CEO Satya Nadella, who has been in charge since 2014 and focused relentlessly on the Cloud. Indeed, some would argue this has been the expensive of more consumer-facing Microsoft technologies.

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Cloud revenue

It is plain to see from examining Microsoft’s financial report, why there is plenty to cheer both investors and Wall Street.

For the fourth quarter ending 30 June, Microsoft posted an overall profit of $13.2bn compared to $8.9bn in the same year ago quarter.

Quarterly revenues rose to $33.7bn from $30bn a year earlier.

For the full year, the picture was equally positive, as Microsoft made a profit of $39.2bn up dramatically from $16.6bn in 2018.

Sales also skyrocketed 14 percent to $125.8bn from $110bn in the previous year.

“It was a record fiscal year for Microsoft, a result of our deep partnerships with leading companies in every industry,” said Satya Nadella.

“Every day we work alongside our customers to help them build their own digital capability – innovating with them, creating new businesses with them, and earning their trust,” said Nadella. “This commitment to our customers’ success is resulting in larger, multi-year commercial cloud agreements and growing momentum across every layer of our technology stack.”

It should be remembered that Microsoft had reached the $1 trillion (£774 billion) in market value for the first time back in April this year.

Breaking down the quarterly figures, it is clear that Azure and the cloud were the star performers for Microsoft, and for the first time ever, Azure earned Microsoft slightly more money than Windows and Redmond’s more traditional products.

Revenue in the Intelligent Cloud unit was $11.4 billion and increased 19 percent, compared with revenue in ‘More Personal Computing’ division was $11.3 billion and increased 4 percent.

Other noteworthy takeaways was that Surface revenue increased 14 percent, but Gaming revenue declined 10 percent, with Xbox software and services revenue down 3 percent.

Consumer worries

Whilst Nadella’s cloud focus has pleased investors and helped the firm deliver another set of very strong financials, some observers remain concerned at Microsoft’s commitment to its consumer market heritage.

Earlier this year for example Microsoft finally admitted there is no recovery from its ignominious retreat from the smartphone sector, after it advised Windows 10 Mobile diehards to switch to either Android or iOS handsets.

There is also concern about the future of Cortana in the consumer space, and matters were not helped when Microsoft signalled another consumer retreat last October when it confirmed that it was shutting its Groove Music service and told its users to switch to Spotify.

Microsoft has also been accused of ignoring Skype, which has been in decline against the likes of WhatsApp and Apple Facetime.

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Author: Tom Jowitt
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