Microsoft’s Q2 Earnings Point to Success of Cloud-Focused Strategy

After Microsoft reported earnings last week for the quarter ending Dec. 31, its stock jumped by more than 8 percent. That’s despite the fact that both profit and revenue fell from the previous year.

Why? Investors are excited about some of the same segments of Microsoft’s business that have drawn interest from developers: cloud services and productivity software.

Microsoft Azure, now second only to Amazon Web Services in its share of the public cloud market, saw revenue growth of 140 percent in the quarter. That number helps validate Microsoft’s ongoing transformation from a company known for making PCs and operating systems to one focused on providing cloud and enterprise services for today’s tech-savvy businesses.

“Azure is a compelling option that is slowly closing the gap on AWS, and I don’t see anything taking away from that trend,” Gartner Research vice president Adam Woodyer told USA Today. “Microsoft is still tied to (shrinking) PC demand, but we do see a gradual decoupling on that front.”

Office 365, the cloud version of Microsoft’s productivity suite, now boasts 20.6 million consumer subscriptions, up from 9.2 million last year. On the enterprise front, new research from Gartner shows Office 365 beating Google Apps for Work in adoption by large, publicly-traded companies. On Monday, Microsoft announced it would offer small businesses free access to its FastTrack program, which helps businesses transition to Office 365.

Acknowledging the fierce competition it faces from rivals like Apple and Google, Microsoft has been encouraging the growth of Office on rival platforms iOS and Android. The company’s vision is that Office 365 becomes a productivity aid outside the office as well, from homes to cars. A ‘Hack Productivity’ hackathon going on until March 1 offers developers  up to $10,000 in prizes for the best use of Office 365 Add-ins and APIs to “help people do and achieve more using Office 365.”

While the company beat analyst expectations in almost every category, there was one giant (if unsurprising) flop: Windows Phone, where revenue fell 49 percent. In fact, just over 1 percent of smart phones sold in the quarter were Windows Phones, prompting some to declare that part of the company’s business DOA. Sales of Surface tablets and 2-in-1 laptops, on the other hand, were strong.

The takeaway from all this: There’s plenty of room for developer innovation in the new Microsoft ecosystem. You’re just more likely to see your app deployed on a tablet or an as-yet-unenvisioned cloud-connected device of the future than on a Windows Phone.


We deliver solutions that accelerate the value of Azure.

Ready to experience the full power of Microsoft Azure?

Start Today

Stay Connected

Upcoming Events

All Events