After the first quarter results were released three months ago, I was looking for catalysts that could drive continued growth for Amazon.
In this last quarter, after Microsoft’s best three-year sales growth of 21% a year ago, I’m looking at the outlook for the software and cloud vendor and why, despite good results quarter after quarter, there’s no reason to believe that this success story should end soon.
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The expansion of the clouds is huge
For several quarters, critics have questioned whether Microsoft will be able to maintain its cloud growth with Azure’s number focus. Amazon’s competitor Amazon Web Services (AWS) has reported steady growth of about 30% quarter on quarter, with the latter amount of just over $ 13.5 billion.
However, Microsoft brought Azure about 50% growth in the last quarter. And while the company doesn’t disclose its actual revenue number, it does offer a total of its Intelligent Cloud segment, which includes more than just an infrastructure (Azure) number. The company grew 30% to over $ 17 billion.
It is also crucial to understand that a hybrid cloud that combines on-premises and cloud computing has been widely proclaimed to be the preferred computing architecture for businesses. Microsoft is well placed to compete and gain significant market share in this area.
Azure Arc’s enterprise hybrid and multi-cloud management is strong. CEO Satya Nadella has explicitly said that Microsoft is a potential adopter of multiple clouds, including competitive cloud services. However, Nadella has shown a strong understanding of market direction and the value of an open approach. I expect business users to respond positively to this mood.
Business applications and teams
Microsoft productivity increased 25% due to strong growth in Dynamics ERP / CRM and Dynamics 365 cloud offerings, 33% and 49%, respectively. These are fixed numbers for this subset and a catalyst for growth, despite the fact that they often fly under the radar.
I have had the prospect of Microsoft Dynamics and its cloud offering Dynamics 365 for some time. This rising mood has been driven by Microsoft’s overall momentum and its vertical integration, which brings infrastructure, data, and platform closer together to create a ubiquitous user experience that leverages the entire stack of solutions.
Over the past quarter, Microsoft has been actively deepening the integration of its business applications with Microsoft Teams. These integrations are designed to make Teamwork a core work center for the company by eliminating friction and giving employees greater access to document and data systems.
This may seem like it’s just emerging, but it’s far from over, as companies look for ways to streamline productivity and get workers out of the inbox. In Tuesday’s earnings report, Microsoft updated that Teams has now reached 250 million monthly users. This ecosystem offers a huge opportunity for growth and expansion, and a company’s integration investments should yield meaningful results.
With the Salesforce agreement to buy Slack now in place, I see the two companies competing even faster to accelerate innovation as companies want to combine collaboration and business applications to adapt to new post-pandemic work styles. But I see competition as something that both companies can feed on. This is an example where I believe that competition is good for both companies.
The only real concern for the quarter was the 20% drop in Surface, while all other computer manufacturers seem to be selling devices as quickly as possible to get chips to make them. With the help of Intel
to achieve record computer results, it seems that the Surface Business should do better.
Microsoft cited the flaw as an incentive for lower performance. If this is the case, this short-term delay in equipment may change over the next several quarters as semiconductor production meets market demand. The poor Surface results for the quarter are undoubtedly a hiccup for Microsoft, but it should not be considered a long-term problem if the segment does not show a downward pattern.
Avoidance of regulatory control
Over the past few months, the work of policy makers has expanded, focusing on rewriting antitrust legislation and giving additional powers to agencies such as the FTC to control and regulate Big Tech. Having certainly spent his day under the microscope, Microsoft is largely on the fringes of the current antitrust litany.
Although the names are more closely related to current regulatory efforts, such as Apple, Alphabet, Facebook
and Amazon show little evidence that regulatory action will affect short – term results, the continuing threat of anti – competitive reform and its potential to significantly alter revenue streams or even lead to an unlikely interruption between some or all of these companies. at least in a small corner of the investor world.
Microsoft’s growth has been stable in all segments, and the last two quarters have brought revenue growth to the company’s best level in more than three years. Its products and solutions provide excessive growth in most categories, and the ability to avoid regulatory costs and chaos at the moment allows it to accelerate, while others are busy protecting their business models – which should help Microsoft’s long-term prospects, even if only slightly.
Daniel Newman is the company’s chief analystfuture research, which provides or has provided research, analysis, consulting and / or consulting to Nvidia, Qualcomm, Microsoft, Amazon and dozens of other technology and digital companies. Neither he nor his company has a shareholding in any of these companies. Follow him on Twitter@danielnewmanUV.