Summary: Microsoft reported its FY2Q21 results (CY4Q20), which showed an uptick in growth across a number of its cloud services.
Azure: The Azure business grew 50% y/y in the recent quarter (48% y/y in constant currency). This compared to 48% (47% in constant currency) in the previous quarter. The improvement was expected to a certain extent given the traffic increases that come during the holiday season, but at the same time speaks to emerging stabilization in the overall cloud growth trajectory. Azure continues to scale and is maintaining growth in the 50% y/y range.
Growth dynamics: Microsoft saw more momentum with larger deals and confirmed material growth in Azure and Microsoft 365 contracts that exceeded $10m. Fundamental or core consumption was identified again as a key driver of growth as organizations expanded Azure usage. This was on both the raw infrastructure and value-add sides. On the earnings call, management pointed to increased customer uptake in Power Platform and its advanced security and compliance offerings. Notably, Microsoft confirmed seeing some re-acceleration in growth velocity, particularly in some of the industries that have been hit harder by the pandemic environment.
LinkedIn: LinkedIn continues to drive growth at Microsoft. Growth came in at 23% y/y (22% in constant currency) and this was up substantially from the last quarter when it grew 16% y/y. LinkedIn continues to be a driver of Microsoft’s wholesale data centre consumption.
Footprint expansion: Microsoft continues to expand its footprint aggressively on a global basis and announced that seven new cloud regions will be added.
Converged infrastructure: Azure Stack HCI became broadly available and is enabling hybrid environments across on-premise, cloud and at the edge. Microsoft confirmed more than 1k customers now use Azure Arc for hybrid management.
SAP migrations: SAP workloads are making the journey to cloud. Microsoft confirmed large enterprise ERP migrations to Azure (in the last six months) were conducted by the likes of Bayer, Carhartt, Coats and Pepsico.
Gaming growth: Gaming is an increasingly strategic part of the Microsoft portfolio. The overall growth is pushing game developers to cloud infrastructure for development and scaling. Meanwhile, Microsoft continues to growth its online gaming subscription base. Azure is positioned to benefit.
Angle: The Azure cloud has held steady and showed an uptick in growth in the recent quarter. This was achieved despite a pandemic environment and the accumulating scale of the business. The declines in public cloud growth rates seen earlier in 2020 seem to have have stabilized. Existing customer expansion is driving growth and new customers are on the way as organizations accelerate moves online and to the cloud. The conditions are in place for cloud to perhaps pick up even more momentum if the macroeconomic environment improves in 2021. Microsoft’s cloud growth is also uniquely multi-faceted, given the other services that are running on the Azure platform. It is no coincidence that Microsoft continues to be the biggest leaser of colocation capacity.
The post Microsoft reports FY2Q21 results; uptick in Azure, LinkedIn growth, data centre consumption appeared first on Structure Research | Cloud, Hosting & Data Centres.