Service Provider Cloud

Microsoft cloud has a COVID-19 silver lining

Microsoft is thriving business-wise from the coronavirus outbreak. Lockdown measures have given a huge fillip to the software giant's cloud business and helped margins keep firm.

The software giant posted a 15% year-on-year increase in revenue, to $35 billion, during fiscal Q3 (ended March 31). Earnings per share, at $1.40, was well ahead of forecasts.

Turnover at its "intelligent cloud" segment rose 27%, year-on-year, to $12.3 billion. Engines of top-line growth were server products and cloud services, which posted a revenue hike of 30%.

Microsoft's Azure cloud computing platform, which sits within the "server products and cloud services" sub-category, posted another head-turning jump in sales (59%). Previous quarters in the fiscal year showed similar sharp rises in Azure sales.

"We've seen two years' worth of digital transformation in two months," said Satya Nadella, Microsoft's CEO. It was a reference to how businesses are adapting swiftly to a new normal of remote teamwork and learning, as well as increased reliance on critical cloud infrastructure and advanced security solutions.

"This trend is likely to be sustained, meaning that cloud revenue growth should continue to be elevated for the next 12 months or so," said Richard Windsor at Radio Free Mobile.

Strong demand for Office products, both consumer and commercial, saw Microsoft's productivity and business processes unit put in a solid Q3 performance. Revenue was up 15%, year-on-year, to $11.7 billion.

Overall Q3 revenue from "commercial cloud" was $13.3 billion, an impressive 39% year-on-year leap. Gross margin at commercial cloud was 67%, up four points year-on-year, mainly because of improvement in Azure gross margin.

The more personal computing segment, which is clearly vulnerable to any downturn in consumer PC spending, managed a creditable 3% turnover increase, to $11 billion, compared with Q3 2019.

In line with forecasts, said Windsor, Microsoft expects Q4 2020 revenue to hit $36.5 billion.

— Ken Wieland, contributing editor, special to Light Reading

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