Azure at the heart of Microsoft's revenue growth

published 27 April 2018

Microsoft's expanding cloud services were a key driving force behind its healthy 2018 fiscal year third-quarter earnings, with year-on-year profit growing 35% to hit $7.4 billion.

Figures from the first three months of 2018 show Microsoft's flagship cloud computing service Azure grew 93% year-on-year, driving its 16% growth in revenue from $23.2 billion to $26.8 billion. Redmond's overall business orientated cloud portfolio division, dubbed Intelligent Cloud, grew by 17% over the same quarter a year earlier.

Meanwhile, Dynamics 365, Microsoft's line of CRM and ERP applications released in 2016, grew 65% - underlining a 17% growth in revenue in Productivity and Business Processes division to $9 billion overall.

"Our results this quarter reflect the trust people and organizations are placing in the Microsoft Cloud," said Satya Nadella, chief executive officer of Microsoft. "We are innovating across key growth categories of infrastructure, AI, productivity, and business applications to deliver differentiated value to customers."

Judson Althoff, executive vice president of Microsoft's Worldwide Commercial Business organisation, said the company's growth can be attributed to its customers' digital innovation.

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"As always, this growth is fueled by the innovation and success of our customers and partners," Althoff said, highlighting several use cases. "Today, almost every company is a tech company, and below are a few examples of companies working closely with Microsoft to advance their digital business strategies."

Citing Toyota Material Handling Europe using Azure, AI and HoloLens to drive innovation in its factories, and Bhler AG, a leading food processing manufacturer, that has used the cloud to improve food safety standards, he added: "Companies across all industries need a trusted cloud infrastructure, a powerful data estate and accessible AI technologies to grow and transform."

Otherwise, revenue in Surface products increased 32% in-part down to Microsoft's hardware refresh in 2017; releasing the next-generation Surface Pro and Surface Book 2 in June and November respectively. LinkedIn similarly grew strongly, by 37%, as Office 365 subscribers rose to 30.6 million consumers, and 135 million business users.

Microsoft's healthy financial outlook may be a product of its eagerness to expand the range of applications for its cloud services, for example, unveiling a range of initiatives to boost its presence in healthcare starting with the cloud-based platform Microsoft Genomics.

Azure's rapid growth, meanwhile, compounds recent research by Gartner that revealed large cloud providers, including Microsoft, Amazon, Google and Rackspace, are increasingly dominating the market, with the research institute predicting the top 10 cloud providers will account for 70% of IaaS revenues in the next three years.

Keumars Afifi-Sabet is a writer and editor that specialises in public sector, cyber security, and cloud computing. He first joined ITPro as a staff writer in April 2018 and eventually became its Features Editor. Although a regular contributor to other tech sites in the past, these days you will find Keumars on LiveScience, where he runs its Technology section.