If there was any lingering doubt about whether Microsoft or Amazon is the biggest and most-influential enterprise-cloud vendor in the world, Microsoft’s stellar Q1 results have blown those questions to bits.
Here are 5 numbers from yesterday’s earnings call to support my claim.
1. $107 billion of future business is on the books. Microsoft’s “commercial remaining performance obligation” jumped 23% in constant currency to $107 billion. Every cloud company releases some version of this number to give an indication of future opportunities, but nobody comes anywhere close to this level of future contracted business. That means that as big as Microsoft’s lead is right now, that lead is growing. I’m not sure which of those two numbers is more impressive: that commercial RPO has soared well past $100 billion, or that the company was able to grow that metric by 23% since last Q1. About half of that $107 billion will be recognized in the coming 12 months, and the other half at some point beyond.
2. Commercial Cloud is now by far the largest business unit within Microsoft. Total Q1 revenue for the company was $37.2 billion, up a very impressive 12%. But the enterprise-cloud business grew at a 2.5X faster rate: up 31% to $15.2 billion from the year-earlier $11.6 billion. That means the cloud business now makes up 40.8% of the revenue of the world’s most-valuable or second-most-valuable company. (Microsoft and Amazon are each valued at just north of $1.61 trillion, so I have to hedge a bit on the question of market-cap leader.)
3. Azure Q1 revenue grew at 47% in constant currency. Some folks wring their hands over Azure’s declining growth rate, and there’s no question that the rate of Azure growth is slowing. Here are the figures for the past 6 quarters, all in constant currency: 68%, 63%, 64%, 59%, 50%, and now 47%. Microsoft doesn’t break out revenue for Azure, but it’s clearly a huge component in the Commercial Cloud quarterly total of $15.2 billion, which as noted above grew at a lusty 31%. As impressive as that figure is with that huge base, Azure is growing 50% faster than the overall cloud business.
4. Driven by Azure, commercial bookings beat expectations. CFO Amy Hood said this key indicator of future business increased “18% in constant currency, driven by our core annuity sales motions and an increase in the number of large, long-term Azure contracts.”
5. The Azure business is now bigger than Windows, one analyst said. While neither CEO Satya Nadella nor CFO Hood confirmed or denied this contention, analyst Brent Bracelin of Piper Sandler made two provocative claims about Azure’s stunning growth as a lead-up to his question. “I wanted to follow up on Azure,” Bracelin said on the call. “This is a segment that’s grown now to 17% of revenue, which I think is up from 4% just three years ago…. From a size standpoint, in my model it looks like Azure is bigger than the Windows business for the first time ever.”
Amazon and its AWS unit deservedly receive great acclaim for their leadership in the public-cloud infrastructure space, and tomorrow afternoon they’ll release their Q3 numbers. It will be interesting to look at not just revenue figures but also comparative growth rates for Microsoft and AWS.
And I’d say that if AWS can come anywhere close to the growth numbers that Microsoft has put up, that will be a great achievement for Amazon.
Because Microsoft is delivering results beyond what any other enterprise-tech company has ever achieved.
Disclosure: at the time of this writing, Microsoft was among the many clients of Cloud Wars Media LLC and/or Evans Strategic Communications LLC.
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