Earlier this week, Microsoft (Nasdaq: MSFT) reported its first quarter results that continued to surpass all market expectations. Its focus on Azure offerings is helping Microsoft gain a bigger market share within cloud services. Analysts believe that the current pandemic conditions are driving spending on cloud services, and Microsoft is making sure it taps into this opportunity.
Revenues for the first quarter grew 12% to $37.2 billion, significantly ahead of the market’s forecast of $35.7 billion. EPS grew 32% over the year to $1.82 versus market estimates of $1.54.
By segment, revenue from Productivity and Business Processes grew 11% to $12.3 billion. Office Commercial revenue grew 9% over the year. Revenue from Intelligent Cloud improved 20% to $13 billion. Azure’s revenues grew 48%. Revenue from More Personal Computing grew 6% to $11.8 billion with Windows OEM revenue declining 5% over the year. Xbox content and services revenue increased 30%.
For the second quarter, Microsoft forecast revenues of $39.5-$40.4 billion. The market was looking for revenues of $40.2 billion for the quarter with an EPS of $1.59 and revenues of $155.3 billion with an EPS of $6.36 for the year.
Microsoft’s Azure Growth
During the quarter, Microsoft continued to focus on Azure. It expanded its hybrid capabilities to allow organizations to seamlessly build, manage, and deploy applications anywhere. It recently launched Azure Arc that allows customers to extend Azure management and deploy Azure data services either on-premises, at the edge, or in multi-cloud environments.
Other new features released recently include Azure SQL Edge that will bring the SQL data engine to IoT devices for the first time. Microsoft is also partnering with SpaceX and SES to allow Azure to compute anywhere on the planet. It also expanded its partnerships with companies such as AT&T and Telstra to bring both the cloud and the edge to their networks.
Azure Synapse is helping organizations by redefining cloud analytics. It is integrating enterprise data warehousing and big data analytics so that customers can run real-time analytics over operational data with Synapse Link and build advanced AI models to identify trends and predict outcomes using Azure Machine Learning.
Microsoft also announced the availability of its first industry-specific cloud, Mircosoft Cloud for Healthcare. The vertical-focused offering will bring together healthcare-specific capabilities from Dynamics 365, Microsoft 365, Power Platform, and Azure to help providers improve patient outcomes.
In some interesting statistics, Microsoft revealed that more than one million SQL databases have migrated to Azure, and Microsoft processes over 1.4 customer queries every day. The number of petabyte-scale workloads that are running on Azure has more than doubled in the past year.
According to a recent report by Canalys, the top four cloud providers account for 63% of the global infrastructure services spend. Driven by the global pandemic, worldwide cloud infrastructure spend grew 31% in the second quarter of the year to $34.6 billion. Within the sector, Azure appears to be eating into the market share of other vendors. Amazon remains the leading provider with AWS accounting for 31% of the market share in Q2 2020 compared with 32% share in Q1 2020. But Azure’s share grew from 17% in Q1 to 20% in Q2 of the year. Clearly, Microsoft’s initiatives are paying off.
Microsoft C3.ai Adobe Partnership
Earlier this week, Microsoft announced its partnership with C3.ai and Adobe. Together, Adobe and Microsoft released C3 AI CRM powered by Microsoft Dynamics 365, the first enterprise-class, AI-first customer relationship management solution that has been purpose-built for industries. The solution is integrated with Adobe Experience Cloud and drives customer-facing operations with predictive business insights. When embedded with the C3 AI Suite and Microsoft Dynamics 365, Adobe Experience Cloud, a leading solution for customer experience, will be able to help brands deliver rich customer experiences to drive business growth.
Through a joint go-to-market offering, the companies will offer an integrated suite of industry-specific AI-enabled CRM solutions that will cater to marketing, sales, and customer service requirements.
Industry experts believe that the current dynamics of the market and the need for digital transformation have changed CRM market requirements and a general-purpose CRM system of record is no longer sufficient. Customers are looking for industry-specific, fully AI-enabled solutions instead. The C3 AI CRM is geared to meet these requirements by allowing customers to accurately forecast revenue, predict product demand, identify and reduce customer churn, identify prospects and conduct AI-driven segmentation, marketing, and targeting activities. The joint solution leverages the common data model of the Open Data Initiative and simplifies the process of bringing together disparate customer data from across the enterprise.