Microsoft released its fourth quarter earnings on July 18, and cloud has come out the clear winner. Growing by more 100% year-over-year, Azure Cloud now joins Office 365 as one of the company’s fastest growing divisions.
Microsoft posted strong growth on these two initiatives even as Personal Computing dropped 4% from the year-ago period. The drag was caused by a whopping 70% drop in their mobile phone revenues.
The declining PC market and Microsoft’s failure to capture any significant segment of the smartphone market with its Nokia bid are weighing heavily on the company. The decision to divest of their feature phone segment earlier this quarter might cause a temporary revenue hit, but it’s a good move in the long run. Microsoft cannot afford to have any dead weight at this critical time in their history when they’re trying to recover from the PC debacle that continues to drag them down quarter after quarter.
The growth of cloud is something not just Microsoft is benefiting from. The unabated demand for more Infrastructure-as-a-Service is helping Amazon, IBM, Google and all other cloud providers alike. Most of these companies have “baggage” that they need to deal with: for Amazon, it’s their lackluster profitability in retail; for IBM it’s their declining legacy lines of business; for Google it’s over-reliance on advertising revenues.
This quarter’s earnings mark the beginning of the new Microsoft that I’ve been writing about recently – one that is moving from being a standalone software vendor to becoming a company on the cloud, where all of its software offerings are being pushed to the market on an “as-a-Service” basis.
After Azure and Office 365, the newest products to join the ranks is Windows 10 E3 enterprise subscriptions and, now, Microsoft Stream, a cloud-based video sharing environment where companies can host and share their video assets with closed groups.