Microsoft's plan to become a major cloud competitor is working

Phillip Butler
October 27, 2017

Office 365 commercial revenue has increased by 42 percent while the consumer version of Office 365 now has 28 million subscribers.

Microsoft has released its earnings report for FY18 Q1.

Revenue rose 12 per cent to US$24.54 billion. In 2015, a year after being named the company's CEO, Satya Nadella said he wanted Microsoft to hit that target sometime in 2018 - a big jump up from the $6.3 billion business it was back then. Gaming revenue, however, only increased 1 percent, even as Xbox software and services revenue was up 21 percent. Azure commands an impressive 90 percent revenue increase from this time past year and income from its office products has gone up as well.

That said, cloud revenue continues to dominate Microsoft's earnings, raking in nearly $20 billion this past quarter.

Cloud goal: Microsoft topped its goal of passing $20B in commercial cloud ARR this fiscal year.

"Our strong start to the fiscal year reflects the impact of our continued investment in product innovation and sales capacity to capture expanding market opportunities", said Amy Hood, executive vice president and chief financial officer at Microsoft. This quarter, those numbers turned around as Surface revenue grew 12 percent. The rest is a 2% (2% in CC) increase in server revenue.

For the More Personal Computing segment, Microsoft reported $9.4 billion in revenue... In advertising, Microsoft reported a 15 percent revenue increase - excluding traffic acquisition costs - which the report says is driven by higher revenue per search and search volume. Windows commercial licensing and cloud services revenue increased by 7 percent. This recent period was the first full quarter in which stores were stocked with an update to that product - Microsoft's best-selling Surface - and a totally new category, a laptop computer with a clamshell design. Microsoft said earlier this month that Bank of America will use both Azure and Office 365 as it shifts more of its operations to the cloud.

The technology giant's net income rose to US$6.58b in the first quarter, from US$5.67b a year earlier.

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