Azure growth slows, but market share is increasing
Microsoft more than doubled its net income year-on-year for the 12 months ending June 30, its earnings revealed today, pocketing $39 billion, up from $16 billion the previous year, as net income tax benefits caused by the repatriation of “certain intangible properties held by our foreign subsidiaries” to the US kicked in.
The huge shift in Microsoft results comes as the company faced a net charge of $13.7 billion during the twelve months ended June 30, 2018 related to the Tax Cuts and Jobs Act (TCJA); one of the US’s most significant tax code overhauls in over three decades, which included a one-time tax on past profits of US corporations’ foreign subsidiaries.
“Actual” operating income was up 23 percent. Azure was the standout performer over the past quarter, meanwhile, with revenue climbing 64 percent on the previous quarter. Office 365 Commercial was up 31 percent and Dynamics 365 up 45 percent. LinkedIn grew 25 percent. Windows OEM Pro revenue growth climbed 18 percent in the quarter, driven by strong demand as Windows 7 support ends, Microsoft said.
“It was a record fiscal year for Microsoft, a result of our deep partnerships with leading companies in every industry,” said Satya Nadella, Microsoft’s CEO. He added: “Every day we work alongside our customers to help them build their own digital capability – innovating with them, creating new businesses with them, and earning their trust. This commitment to our customers’ success is resulting in larger, multi-year commercial cloud agreements and growing momentum across every layer of our technology stack.”
While Azure revenue growth fell over the past few quarters, as Synergy’s John Dinsdale noted, market share percentage continued to climb for Microsoft.
He said: “Microsoft is a clear number two in cloud infrastructure services (IaaS, PaaS, hosted private cloud), still a long way behind AWS but well ahead of the rest of the pack.” He added: “Its revenue growth rate is way above the overall market growth rate, so it is gradually gaining marketshare – 9 percent in 2016, 11 percent in 2017, 14 percent in 2018 and 16 percent in the first quarter of 2019.”
Microsoft Results: Gaming a Dark Cloud
If there was one cloud in the earnings, it was gaming revenue, which fell 10 percent. Xbox hardware revenue suffered even worse, tumbling 48 percent as console sales stalled, Microsoft’s earnings slides showed. That comes as a current console generation ages and consumers await a next generation of consoles.