Microsoft cloud revenue jumps 32%

Microsoft’s cloud business continued to rain money for the software giant during its fiscal 2022 second quarter, with cloud revenue up 32% year-over-year to $22.1 billion. Intelligent Cloud, which includes Microsoft Azure, reported revenue of $18.3 billion, up 26% year-over-year.

CEO Satya Nadella kicked off the quarterly earnings call by sharing Azure milestones. “We have more data center regions than any other provider,” he said. “We are extending our infrastructure to the 5G network edge, helping operators and enterprises create new business models.” As an example, Nadella highlighted work Microsoft and AT&T are doing to help General Motors build connected cars.

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Overall company revenue for the quarter was a record $51.7 billion, up 20 % year-on-year, and net income rose 21% to $18.8 billion. 

CFO Amy Hood took investors through segment performance, highlighting 46% growth for "Azure and other cloud services." She also outlined projections for the current quarter, noting the stronger dollar could decrease revenue growth rates, and reminding investors "the growing mix of larger long-term Azure contracts, which are more unpredictable in their timing, drive increased quarterly volatility in our bookings growth rate." She projected capital expenditures in the current quarter will be down slightly from last quarter's $6.8 billion.

Hood also highlighted Azure’s focus on vertical markets, noting Microsoft now offers six separate industry clouds. She called out the Cloud for Sustainability, which cuts across several verticals and is used to help companies track and meet sustainability goals.

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Throughout the earnings call, the executives referred to investments in personnel, and Nadella acknowledged the competitive labor market. “We are not immune from what happens overall in the labor market,” he said. “All businesses are going to be subject to the laws of economic growth in the overall economy.”

Nadella’s comments echoed those made one day earlier by IBM CEO Arvind Krishna, who also referenced “increased pressure on labor costs due to higher acquisition, retention and wages” during his company’s earnings call.

Customer wins

Nadella highlighted a number of major companies that are now Microsoft cloud customers. Johnson and Johnson is using Microsoft Cloud for Manufacturing, FedEx has partnered with Microsoft for an e-commerce logistics solution and CVS Health has named Microsoft as its preferred cloud provider. In addition, managed IT services giant Kyndryl partnered with Microsoft shortly after becoming independent of IBM.

Nadella noted that Microsoft customer Ecolab is using Azure to “model and optimize water management.” He said Azure IoT is often combined with digital twins and mesh networking and teased an upcoming “Azure open AI model” which he said will feature “advanced language models.”