Microsoft reported strong second quarter fiscal year 2017 (2QFY17) earnings on Jan. 26, laying to rest any doubts that the software giant could transition to a cloud computing company.
Azure revenues climbed a whopping 93 percent, or 95 percent using constant currency calculations that account for exchange rate fluctuations. "These results show continued strength in the cloud and especially Azure business," Dave Bartoletti, principal analyst at Forrester, told eWEEK.
"While Microsoft does not break out Azure from the broader Intelligent Cloud category (which also includes some server products, cloud services, and enterprise services), the Azure business nearly doubled year-over-year (as it did last quarter), and usage continues to double year-over-year," continued Bartoletti. "Basically, Azure is more than twice the size it was at this time last year, and the growth trajectory is consistent."
Office 365, Microsoft's cloud-enabled productivity software suite is another bright spot.
During a Jan. 26 conference call, CEO Satya Nadella noted that on a year-over-year basis, the number of Office 365 commercial seats jumped 37 percent and consumer demand is ramping up. Jack E. Gold, founder and principal analyst at J. Gold Associates noted that "Office 365 grew 47 percent in commercial space and 22 percent in consumer space, indicating an excellent growth rate (and transition) from installed Office apps to a recurring revenues online service."
Even Windows, inexorably linked to the declining PC market, is showing signs of improvement said Gold, adding that the operating system "seems to be taking hold in the enterprise as many more companies are migrating and Windows revenues were up more than expected as a result."
Sales of Windows commercial products and related cloud services were up 5 percent for the quarter, reported Microsoft. Windows OEM revenue attributed to the business-friendly Pro edition rose 6 percent.
Enterprise and education deployments of Windows 10 increased 52 percent in 2QFY17, revealed Nadella in his remarks, but those levels may taper off in the coming quarters. "It's likely that Windows revenues will be flat to only slightly higher going forward as enterprises reach some level of full migration," Gold said, adding that consumer PC sales are essentially flat or sagging slightly.
One decidedly underperforming part of Microsoft's technology portfolio is its phone hardware business, highlighting the company's difficulties competing with the Google Android and Apple iOS mobile operating system platforms.
Phone revenue tumbled 81 percent, the company reported. In November, IDC declared Microsoft's mobile platform "a non-story in 2016" except for HP's enterprise-friendly handset, the X3. The technology analyst firm predicted that by 2020, Windows Phone would claim a meager 0.1 percent share of the smartphone operating system market with shipments of 1 million units.
By comparison, Android is expected to command 85 percent of the market with shipments of nearly 1.5 billion handsets in 2020. Apple iOS is expected to ship out 244 million iPhones that same year for 14 percent of the market.