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Microsoft highlights Cloud results in Q2 earnings

$22.1B in Microsoft Cloud revenue, up 32%

Earlier this week, Microsoft reported second quarter results for the period ending December 31, 2021. Microsoft’s total revenue was $51.7 billion, up 20% and topping $50 billion for the first time. Earnings were $2.48 per share, adjusted, beating Wall Street analysts’ expectations of around $2.31. Overall revenue increased 20% year-over-year, compared with 22% growth for the previous quarter. 

“Solid commercial execution, represented by strong bookings growth driven by long-term Azure commitments, increased Microsoft Cloud revenue to $22.1 billion, up 32% year over year” said Amy Hood, executive vice president and chief financial officer of Microsoft.

While Microsoft does not reveal Azure revenue, it noted a 46% revenue change year- over-year, 2% lower. Before this week, Microsoft had reported four consecutive quarters of Azure growth above 50%. 

Azure take center stage

Microsoft CEO Satya Nadella spotlighted Azure in a call with analysts after the announcement. He hyped Microsoft’s aggressive global buildout of Azure data centers.

“We have more data center regions than any other provider, delivering fast access to cloud services while meeting data residency requirements,” said Nadella. 

Nadella also highlighted Microsoft’s Azure Arc business growth. Azure Arc is Microsoft’s hybrid and multi-cloud infrastructure management service.

“Our Azure Arc customer base has tripled year-over-year. We’re now helping thousands of organizations, from BP to Rabobank, unify their on-premises, hybrid, and multi-cloud infrastructure,” said Nadella.

Nadella called Microsoft’s Azure IoT, Digital Twins and Mesh efforts “real enterprise metaverse usage.” Businesses are using using these tools to analyze processes, he added.

“Ecolab, for example, is using these tools to build its own platform to model and optimize water management. Across Azure, we are seeing growing adoption across every sector.”

Nadella also focused comments on security.

“Our aim is to help organizations implement a comprehensive ‘zero trust’ architecture that protects people, devices, applications, and data holistically across their heterogeneous cloud and client environments,” said Nadella.

“Microsoft Cloud revenue grew 32% to $22.1 billion, again, ahead of our expectations,” Hood told analysts, in prepared remarks after Nadella’s introduction.

“Microsoft Cloud gross margin percentage decreased slightly year-over-year to 70%. Excluding the impact from the change in accounting estimate for the useful life of server and network equipment assets, Microsoft Cloud gross margin percentage increased roughly three points, driven by improvement across our cloud services, partially offset by sales mix shift to Azure,” said Hood.

Hood said Microsoft Cloud gross margin percentage to remain flat year-over-year for the third quarter. Capex for the Cloud segment is expected to be down sequentially, she added. Hood attributed this difference to normal quarterly variability in the timing of Microsoft’s cloud infrastructure buildout.

ABOUT AUTHOR

Peter Cohen
Peter Cohen
Peter is Technology Editor for RCR Wireless News. His coverage areas include telco cloud and the convergence of 5G and cloud computing. Peter's background includes IT management and a decade as a senior editor at Macworld. He and his family live in Massachusetts.

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