Earnings

Microsoft earnings: Thanks for the clouds

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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.

Fintech

Judge Zia Faruqui is trying to teach you crypto, one ‘SNL’ reference at a time

His decisions on major cryptocurrency cases have quoted "The Big Lebowski," "SNL," and "Dr. Strangelove." That’s because he wants you — yes, you — to read them.

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Photo: Carolyn Van Houten/The Washington Post via Getty Images

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Veronica Irwin

Veronica Irwin (@vronirwin) is a San Francisco-based reporter at Protocol covering fintech. Previously she was at the San Francisco Examiner, covering tech from a hyper-local angle. Before that, her byline was featured in SF Weekly, The Nation, Techworker, Ms. Magazine and The Frisc.

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The Financial Technology Association (FTA) represents industry leaders shaping the future of finance. We champion the power of technology-centered financial services and advocate for the modernization of financial regulation to support inclusion and responsible innovation.
Enterprise

AWS CEO: The cloud isn’t just about technology

As AWS preps for its annual re:Invent conference, Adam Selipsky talks product strategy, support for hybrid environments, and the value of the cloud in uncertain economic times.

Photo: Noah Berger/Getty Images for Amazon Web Services

AWS is gearing up for re:Invent, its annual cloud computing conference where announcements this year are expected to focus on its end-to-end data strategy and delivering new industry-specific services.

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Donna Goodison

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Image: Protocol

We launched Protocol in February 2020 to cover the evolving power center of tech. It is with deep sadness that just under three years later, we are winding down the publication.

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Bennett Richardson ( @bennettrich) is the president of Protocol. Prior to joining Protocol in 2019, Bennett was executive director of global strategic partnerships at POLITICO, where he led strategic growth efforts including POLITICO's European expansion in Brussels and POLITICO's creative agency POLITICO Focus during his six years with the company. Prior to POLITICO, Bennett was co-founder and CMO of Hinge, the mobile dating company recently acquired by Match Group. Bennett began his career in digital and social brand marketing working with major brands across tech, energy, and health care at leading marketing and communications agencies including Edelman and GMMB. Bennett is originally from Portland, Maine, and received his bachelor's degree from Colgate University.

Enterprise

Why large enterprises struggle to find suitable platforms for MLops

As companies expand their use of AI beyond running just a few machine learning models, and as larger enterprises go from deploying hundreds of models to thousands and even millions of models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

As companies expand their use of AI beyond running just a few machine learning models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

Photo: artpartner-images via Getty Images

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