Microsoft has reported revenues of $37.2 billion (£28.8bn) for its most recent quarter with Azure revenue growth at 48% – as one analyst argued Azure has overtaken Windows numbers for the first time.

The nuts and bolts of the earnings release did not differ from the norm. The headline for the earnings release, ‘Microsoft Cloud Strength Fuels First Quarter Results’, conforms to the usual template which this publication noted this time last year: ‘Microsoft Cloud [noun] [verb] [quarter] Results.’ “The noun, usually ‘growth’ or ‘strength’, is optional, as is the word ‘record’ when allowable, while the requisite verb will either be ‘powers’, ‘fuels’, or ‘drives’”.

Like the headline, the numbers saw everything pretty much continue to go in the right direction. For the three buckets in which it divides revenue, intelligent cloud – which covers most, if not all, Azure – saw the biggest yearly rise, 20% at $13bn. Productivity and business processes was at $12.3bn, an 11% uptick, while more personal computing was at $11.8bn at an increase of 6%.

Microsoft said commercial cloud revenue was at $15.2bn, up 31% year on year – the company topped $50bn for the year for the first time in its previous quarterly report – while ‘server products and cloud services revenue’, as part of the intelligent cloud bucket, was up 22%.

As before, Microsoft continues to avoid giving a specific figure for Azure revenue, making it alone compared with its contemporaries of Amazon Web Services, Google Cloud, and Alibaba Cloud. Yet on the earnings call following the announcement, Brent Bracelin, of Piper Sandler, estimated that his model saw Azure as larger than the Windows business for the first time.

Bracelin also noted Azure (below) had grown to 17% of Microsoft’s overall revenue, compared to 4% three years ago. Whichever way Microsoft cuts its cloth, the reported growth in ‘intelligent cloud’ in particular in this time is notable.

Answering the subsequent question on how big Azure could be and the current state of play, Microsoft CEO Satya Nadella said the market would ‘double’ in the next 10 years, with the Covid-19 pandemic accelerating this trend.

“The most secular need [is] the need for distributed cloud infrastructure,” said Nadella. “It’s both needed for modernising existing applications you have… but more importantly, there’s going to be new applications which need infrastructure. So if you add those up, I think that we’re still in [the] early innings.”

Nadella’s answer continued on a wider theme and inferred a reason as to why Microsoft does not disclose specific Azure numbers. As this publication has previously reported – looking last year at why Google, at the time, did not give specific cloud numbers – the real value for the hyperscalers, beyond monetary value, is how each component can be assembled and reassembled to give value to customers. Azure, like Google Cloud Platform, is what underpins it – so it may not be an apples-to-apples comparison.

“We think distributed cloud infrastructure is the most important layer. But the way we’ve approached it is not to just think of that layer in isolation, but the data layer work we do, the AI layer and, more importantly, our SaaS applications, whether business applications, Power Platform, Microsoft 365,” said Nadella. “All reinforce that same modern tech stack. I would still say that digitisation in this new tech stack is in its very infancy.”

Highlights of Microsoft’s most recent quarter included new data centre region openings in Austria and Greece among others, as well as the launch of Azure for Operators, a concerted effort to partner with telecom operators to unlock 5G and edge computing opportunities.

“In a world of uncertainty and constraints, every person and every organisation needs more digital technology to recover and reimagine what comes next,” added Nadella. “This represents an unprecedented expansion of our addressable market in every layer of the tech stack. We are focused on innovating and differentiating to meet these needs and growing opportunity.”

You can read the full Microsoft Q121 earnings report here.

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