Earnings

Microsoft earnings: Thanks for the clouds

​Microsoft logo
Microsoft
  • Q3 revenue: $35 billion (15% YoY, -5% QoQ, vs. $33.7 billion expected)
  • Q3 earnings: $10.8 billion (22% YoY, -7% QoQ, above expectations)
  • Q4 revenue guidance: Microsoft provided segment guidance instead of an overall number, but the total added up to a range of $35.85 billion to $36.8 billion, roughly in line with analyst expectations.

The big number: Revenue from Microsoft Azure grew 59% during the company's third fiscal quarter. While growth has steadily decreased as Azure starts to generate big revenue, Azure is growing faster than anything else Microsoft called out in its earnings release.

People are talking: "We have seen two years worth of digital transformation in two months," CEO Satya Nadella said on the company's earnings call.

Opportunities: A pandemic might be forever reshaping the world economy right now, but it's a good time to be in the enterprise cloud business. Microsoft's commercial cloud revenue — which includes Azure, commercial Office 365, Dynamics 365 and a few other things — grew 39% during the quarter, accounting for the bulk of Microsoft's growth during the quarter.

Current customers are using more and more of Microsoft cloud services thanks to stay-at-home orders: Microsoft Teams usage shot up from 20 million users per day late last year, to 44 million daily users in March and to 75 million daily users as of Wednesday's earnings call.

Potential customers no longer need an education in how cloud computing can modernize their technology infrastructure. Even sales of Microsoft's traditional Windows Server licenses are growing faster as companies increasingly opt for hybrid cloud strategies when upgrading their kit.

Threats: Microsoft had planned to spend more money on capital expenditures during its third quarter than it did in the previous quarter, but blamed the "supply-chain disruptions" that knocked several major manufacturers offline in China during January, as the country grappled with COVID-19. Instead, it spent roughly the same amount ($3.9 billion) on its cloud infrastructure, which had come under fire for the capacity issues that affected Azure customers during the quarter.

Commercial bookings growth fell off a cliff, increasing just 7% during the quarter compared to an increase of 30% in the quarter last year. Bookings are a notoriously imperfect metric when judging the future health of a software company, but that's a substantial drop compared to prior quarters.

The power struggle: Assuming it can fix its capacity issues, Microsoft is in as good a position as any major corporation heading into what could be one of the worst economic quarters in U.S. history. CFO Amy Hood vowed that Microsoft would "invest aggressively" in capital expenditures for its cloud business in the upcoming quarter, and that should help the company support the increasing activity from current customers and bring on new ones.

Enterprise software is not an impulse purchase; it's a vital part of any modern business, and demand for the types of services Microsoft provides will only increase once tech buyers start to understand what their 2021 budgets will look like. Still, competition among Microsoft, AWS and Google for that business is likely to increase, and those companies weren't exactly playing a friendly game of cards before the pandemic.

Climate

This carbon capture startup wants to clean up the worst polluters

The founder and CEO of point-source carbon capture company Carbon Clean discusses what the startup has learned, the future of carbon capture technology, as well as the role of companies like his in battling the climate crisis.

Carbon Clean CEO Aniruddha Sharma told Protocol that fossil fuels are necessary, at least in the near term, to lift the living standards of those who don’t have access to cars and electricity.

Photo: Carbon Clean

Carbon capture and storage has taken on increasing importance as companies with stubborn emissions look for new ways to meet their net zero goals. For hard-to-abate industries like cement and steel production, it’s one of the few options that exist to help them get there.

Yet it’s proven incredibly challenging to scale the technology, which captures carbon pollution at the source. U.K.-based company Carbon Clean is leading the charge to bring down costs. This year, it raised a $150 million series C round, which the startup said is the largest-ever funding round for a point-source carbon capture company.

Keep Reading Show less
Michelle Ma

Michelle Ma (@himichellema) is a reporter at Protocol covering climate. Previously, she was a news editor of live journalism and special coverage for The Wall Street Journal. Prior to that, she worked as a staff writer at Wirecutter. She can be reached at mma@protocol.com.

Sponsored Content

Great products are built on strong patents

Experts say robust intellectual property protection is essential to ensure the long-term R&D required to innovate and maintain America's technology leadership.

Every great tech product that you rely on each day, from the smartphone in your pocket to your music streaming service and navigational system in the car, shares one important thing: part of its innovative design is protected by intellectual property (IP) laws.

From 5G to artificial intelligence, IP protection offers a powerful incentive for researchers to create ground-breaking products, and governmental leaders say its protection is an essential part of maintaining US technology leadership. To quote Secretary of Commerce Gina Raimondo: "intellectual property protection is vital for American innovation and entrepreneurship.”

Keep Reading Show less
James Daly
James Daly has a deep knowledge of creating brand voice identity, including understanding various audiences and targeting messaging accordingly. He enjoys commissioning, editing, writing, and business development, particularly in launching new ventures and building passionate audiences. Daly has led teams large and small to multiple awards and quantifiable success through a strategy built on teamwork, passion, fact-checking, intelligence, analytics, and audience growth while meeting budget goals and production deadlines in fast-paced environments. Daly is the Editorial Director of 2030 Media and a contributor at Wired.
Workplace

Why companies cut staff after raising millions

Are tech firms blowing millions in funding just weeks after getting it? Experts say it's more complicated than that.

Bolt, Trade Republic, HomeLight, and Stord all drew attention from funding announcements that happened just weeks or days before layoffs.

Photo: Pulp Photography/Getty Images

Fintech startup Bolt was one of the first tech companies to slash jobs, cutting 250 employees, or a third of its staff, in May. For some workers, the pain of layoffs was a shock not only because they were the first, but also because the cuts came just four months after Bolt had announced a $355 million series E funding round and achieved a peak valuation of $11 billion.

“Bolt employees were blind sided because the CEO was saying just weeks ago how everything is fine,” an anonymous user wrote on the message board Blind. “It has been an extremely rough day for 1/3 of Bolt employees,” another user posted. “Sadly, I was one of them who was let go after getting a pay-raise just a couple of weeks ago.”

Keep Reading Show less
Nat Rubio-Licht

Nat Rubio-Licht is a Los Angeles-based news writer at Protocol. They graduated from Syracuse University with a degree in newspaper and online journalism in May 2020. Prior to joining the team, they worked at the Los Angeles Business Journal as a technology and aerospace reporter.

Climate

The fight to define the carbon offset market's future

The world’s largest carbon offset issuer is fighting a voluntary effort to standardize the industry. And the fate of the climate could hang in the balance.

It has become increasingly clear that scaling the credit market will first require clear standards and transparency.

Kevin Frayer/Getty Images

There’s a major fight brewing over what kind of standards will govern the carbon offset market.

A group of independent experts looking to clean up the market’s checkered record and the biggest carbon credit issuer on the voluntary market is trying to influence efforts to define what counts as a quality credit. The outcome could make or break an industry increasingly central to tech companies meeting their net zero goals.

Keep Reading Show less
Lisa Martine Jenkins

Lisa Martine Jenkins is a senior reporter at Protocol covering climate. Lisa previously wrote for Morning Consult, Chemical Watch and the Associated Press. Lisa is currently based in Brooklyn, and is originally from the Bay Area. Find her on Twitter ( @l_m_j_) or reach out via email (ljenkins@protocol.com).

Policy

White House AI Bill of Rights lacks specific guidance for AI rules

The document unveiled today by the White House Office of Science and Technology Policy is long on tech guidance, but short on restrictions for AI.

While the document provides extensive suggestions for how to incorporate AI rights in technical design, it does not include any recommendations for restrictions on the use of controversial forms of AI.

Photo: Ana Lanza/Unsplash

It was a year in the making, but people eagerly anticipating the White House Bill of Rights for AI will have to continue waiting for concrete recommendations for future AI policy or restrictions.

Instead, the document unveiled today by the White House Office of Science and Technology Policy is legally non-binding and intended to be used as a handbook and a “guide for society” that could someday inform government AI legislation or regulations.

Blueprint for an AI Bill of Rights features a list of five guidelines for protecting people in relation to AI use:

Keep Reading Show less
Kate Kaye

Kate Kaye is an award-winning multimedia reporter digging deep and telling print, digital and audio stories. She covers AI and data for Protocol. Her reporting on AI and tech ethics issues has been published in OneZero, Fast Company, MIT Technology Review, CityLab, Ad Age and Digiday and heard on NPR. Kate is the creator of RedTailMedia.org and is the author of "Campaign '08: A Turning Point for Digital Media," a book about how the 2008 presidential campaigns used digital media and data.

Latest Stories
Bulletins