Microsoft starts 2022 fiscal year with a bang

Buoyed by soaring demand for digital transformation, Redmond company sees quarterly cloud revenue top $20 billion for first time during its fiscal first quarter.

Ken Wieland, contributing editor

October 27, 2021

3 Min Read
Microsoft starts 2022 fiscal year with a bang

The first quarter of Microsoft's fiscal year continued in much the same vein as the last quarter of its previous fiscal year: On the back of soaring enterprise demand for its cloud-based services portfolio – underpinned by Azure – the Redmond company once again soundly beat analysts' expectations on earnings and revenue.

"We are off to a fast start in fiscal 2022, with Microsoft Cloud quarterly cloud revenue surpassing $20 billion for the first time, up 36% year over year," said Microsoft CEO Satya Nadella on a Q1 conference call.

"The case for digital transformation has never been more urgent or more clear."

Figure 1: Buoyed by soaring demand for digital transformation, Microsoft sees quarterly revenue top $20 billion for first time during fiscal Q1 2022. (Source: Kristoffer Tripplaar/Alamy Stock Photo) Buoyed by soaring demand for digital transformation, Microsoft sees quarterly revenue top $20 billion for first time during fiscal Q1 2022.
(Source: Kristoffer Tripplaar/Alamy Stock Photo)

In after-hours trading on Nasdaq, however, Microsoft's share price only edged up by 2%.

"It implies that expectations are already pretty high", said Richard Windsor, analyst at Radio Free Mobile.

Exceeding expectations

Microsoft's Adjusted earnings per share, at $2.27, eclipsed the $2.07 expected by Refinitiv (as reported by CNBC).

Q1 turnover hurtled forward, too. At $45.3 billion, sales were up 22% year-on-year (so just shading the 21% year-on-year growth clocked up in fiscal Q4 2021). Analysts (again, according to Refinitiv) were expecting Q1 revenue of $43.97 billion.

Microsoft Azure continues to be the star of the cloud-based show, with sales ("along with other cloud services") jumping 50% year-on-year.

Windsor was upbeat about Azure's prospects going forward, noting a stark contrast with Google Cloud, which missed expectations.

"Overall, I think that the competitive threat from Google Cloud is weaker than some may expect, leaving Azure as the only real main rival to AWS," said Windsor.

"Hence, I think that Azure can continue to close the gap on Amazon and will remain largely untroubled by Google Cloud nipping at its heels."

Juicy business segments

Q1 sales in the productivity and business processes division totaled $15 billion, up 20% year-on-year. Growth was driven by increases in Office 365 commercial revenue, cloud services revenue, and Dynamics products, as well as impressive turnover performance from LinkedIn (up 42% year-on-year).

Microsoft CEO Amy Hood, on the earnings conference call, guided revenue between $15.7 and $15.95 billion in this business segment during fiscal Q2 2022, driven again by Office 365.

Turnover at Intelligent Cloud, where Azure sits, was up 31% year-on-year, to $17 billion. In Q2 2022 Microsoft expects revenue of between $18.1 and $18.35 billion.

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"In Q2, we expect healthy, broad-based growth in our Azure consumption business, consistent with recent trends," remarked Hood.

The more personal computing division drummed up $13.3 billion in sales, up 12% compared with FY Q1 2021. There was, however, a 17% revenue drop in Surface revenue. Hood guided revenue here of between $16.35 and $16.75 billion for the current quarter.

"In Surface," she said, "we expect revenue to decline in the single digits as we continue to work through supply chain uncertainty particularly in our premium devices."

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— Ken Wieland, contributing editor, special to Light Reading

About the Author(s)

Ken Wieland

contributing editor

Ken Wieland has been a telecoms journalist and editor for more than 15 years. That includes an eight-year stint as editor of Telecommunications magazine (international edition), three years as editor of Asian Communications, and nearly two years at Informa Telecoms & Media, specialising in mobile broadband. As a freelance telecoms writer Ken has written various industry reports for The Economist Group.

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