So when we started SaaStr waaay back in 2012, I never would have thought of profiling Microsoft and its old-fashioned desktop software. But fast forward to today, and Microsoft truly is a Cloud and SaaS company, with Azure and LinkedIn its fastest growing business units!
Perhaps most importantly. Azure and other cloud services grew a record 40% and the total Microsoft Cloud grew to a $90 Billion run-rate. This is a great sign for the coming quarters, the rest of the year, and more. No matter what other signs of stress there are out there.
$MSFT Q4 2022
– Revenue up 12% to $51.9 billion
– Net income up 2% to 16.7$ billion
– Azure up 40%
– LinkedIn up 26%
– Office Commercial up 9%
– Office 365 Commercial up 15%
– Office Consumer up 9%
– Surface up 10%
– Windows OEM down 2%
– Windows Commercial up 6%
– Xbox down 6%
— Emil Protalinski (@EPro) July 26, 2022
5 Interesting Learnings:
#1. Azure still growing a stunning 40% year-over-year, 46% including all cloud services. While slightly down from the prior quarters of 50% growth, Cloud is still on an incredible tear.
#2. LinkedIn revenue grew a stunning 37%. Marketers are clearly still spending to reach B2B audience. No matter what anyone says. Although that is down from 46% a year ago, more on that here.
#3. $10.9 billion of profits returned to shareholders, or well over 20% of revenues, and $14.5 billion in cash flow from operations . Software is and should be very profitable at scale.
#4. Microsoft Cloud gross margins remain high at 70%. So yes, running 1000s and 1000s of servers as someone’s Cloud can have high margins. And does.
#5. Commercial bookings at all time high in growth, up 32% on the back of multi-year Azure contracts. Again, more evidence that Cloud growth is hardly slowing. No matter what talk of this “recession” there may be.
Now it wasn’t all roses for Microsoft. Gaming and Device had mediocre growth of 8%.
But the Cloud and SaaS parts of Microsoft are firing on all 8 cylinders. Or maybe that’s a fun tank of electrons today. Whatever the metaphor, Microsoft says Yes, These Are Still the Best of Times in Cloud and SaaS.
Even if the stock market and a few others don’t quite agree at the moment.
Azure grew 46% (constant currency) in Q2. That's down from 49% last Q, and 46% two quarters ago. Pretty impressive. Called out growth from consumption driven services in Azure.
Google Cloud grew 36% (don't have constant currency). Grew 44% last Q
— Jamin Ball (@jaminball) July 26, 2022
And a few other interesting learnings:
#6. A record number of $100m+ and — wow! — $1B+ deals. While we didn’t get a revenue split breakdown, Azure clearly is excelling in the enterprise, with a record number of nine-figure and billion-dollar deals. Plural!
#7. But even with this incredible growth, Microsoft is extending the length of service for its servers, for now, to save costs. So even the top performers today and being a least a bit more frugal.
#8. And a bit more on LinkedIn from a little while back here, when it hit $10B in ARR on its own: