Microsoft, the world’s largest company by market capitalisation, late yesterday reported quarterly revenue of $32.5 billion, slightly lower than forecast.
Hard numbers aside, these are the five things that stood out for Computer Business Review from the Microsoft earnings call on Wednesday night.
1: Gaming: Not Playing About
Microsoft is deadly serious about the growth opportunity in gaming and had its largest gaming revenue quarter ever. It acquired two new studios this quarter, bringing the total to 13 and more than doubling its first-party content capacity in the past six months.
Xbox Live monthly active users hit a record 64 million in the quarter, with the highest number of mobile and PC users to date.
PlayFab, the cloud-connected game development company Microsoft bought in January 2018 surpassed one billion player accounts this quarter, and Microsoft’s game-streaming xCloud will be publicly trialled later this year. Microsoft sees huge opportunity in becoming the “Netflix of gaming” across mobile, PC and console. Watch this space for more developments.
2: Chip Constraints Hurting Windows
Continued PC/laptop chip supply constraints are hurting Windows revenues. As Microsoft CFO Amy Hood put it: “The timing of chip supply to our OEM partners… constrained an otherwise healthy PC ecosystem and negatively impacted both OEM Pro and non-Pro revenue growth.”
Windows OEM Pro revenue declined two percent. OEM non-Pro revenue declined 11 percent, below the market “with continued pressure in the entry-level category.” Microsoft expects chip inventory levels to likely remain low as it exits the next quarter as well.
As the CFO put it: “We expect chip supply to remain constrained.”
3: Azure Growing but Slowing
Azure continues to grow strongly, up 76 percent – flat sequentially on-quarter – but this is not as high as the 98 percent the same quarter last year.
The slowdown in growth helped drive a sell-off in Microsoft’s stock, which fell 4 percent on the earnings report. Overall commercial cloud revenue was $9 billion.
(That spans Azure public cloud, commercial subscriptions to the Office 365 productivity software bundle, the Enterprise Mobility and Security products and commercial LinkedIn services.)
Up-selling Azure as “the only hyperscale cloud with a consistent computing stack that extends from the data center to the edge”, CEO Satya Nadella couldn’t help note another USP: some customers were wary of Amazon’s sprawling business empire and were opting for Azure instead.
“We have a trusted relationship, which is a competitive advantage in a world where some of our competitors have more complex business models, where in some cases they give them platforms, in other cases where they compete with them or tax them. That’s definitely something that I’m sure our customers pay attention to,” he told analysts.
4: LinkedIn: Still a Good Bet
Is Microsoft going to “kill” LinkedIn like it killed Skype?
That was a question for many personal users when the company made the acquisition. These fears have not come to pass and commercially, the deal is paying off nicely for Microsoft, with strong growth on the professional networking site.
LinkedIn revenue increased 29 percent, with LinkedIn sessions growing 30 percent as engagement reached record levels. With Microsoft also now having bought employee engagement software company Glint, it sees a compelling opportunity to harness LinkedIn insights about the larger workforce Glint’s intelligence on engagement and is not alienating users the way it did with consumer Skype users.
5: Satya Nadella’s Excited by the “Power” Platform
CEO Satya Nadella came across as particularly excited by Microsoft’s “Power” platform spanning Power BI, Power Apps and Flow; a suite of tools for no code or low code app development, robotic process automation and self-service analytics.
As he put it: “With Power platform, Microsoft is fundamentally demarketizing business processes, empowering everyone to make smarter, faster decisions, and I’m energized about the tremendous opportunity in this space.”
He pointed to British customer Centrica as a key example: “Centrica is relying on Power BI, Power Apps and Flow along with Dynamics 365 to transform scheduling and dispatch of its first-line workforce in the United Kingdom. Virgin Group is using Power Apps and Dynamics 365 to generate a single view of its passengers’ surfacing insights to improve customer service and increase operational efficiency.”