Microsoft Financials: strategic purpose of Github, Teams and PowerApps revealed

Microsoft has announced its quarterly financial statements, reporting revenue of $30.6 billion, up 14% on the same period last year.

The story seems to be largely more of the same, which is good for the company in that all its numbers look good.

The most striking figure is 73% increase in Azure revenue. Azure is the smallest of its three self-defined segments though, though all three are similar in size. “More Personal Computing” (Windows, Surface and gaming) delivered the most revenue, followed by Productivity and Business Processes. That said, at this rate of growth Azure will soon be the biggest of the three segments.

Aside: has there ever been a dafter segment name than More Personal Computing? More than what?

Quarter ending March 31st 2019 vs quarter ending March 31st 2018, $millions

Segment Revenue Change Operating income Change
Productivity and Business Processes 10100 +1236 3979 +864
Intelligent Cloud 9649 +1780 3208 +554
More Personal Computing 10680 +763 3154 +631

The segments break down as:

Productivity and Business Processes: Office, Office 365, Dynamics 365 and on-premises Dynamics, LinkedIn

Intelligent Cloud: Server products, Azure cloud services

More Personal Computing: Consumer including Windows, Xbox; Bing search; Surface hardware

Some points to note. Microsoft reported a “material improvement” in Azure gross margin, something which does not surprise me. In my experience, the Azure Portal does a great job (from Microsoft’s perspective) in steering you towards premium services and extras, as I found when trying Windows Virtual Desktop – check my note on the VPN Gateway at $140 per month).

Office 365 is still growing, up 30% according to Microsoft’s slides. LinkedIn is also increasing revenue, up 27%.

Despite Chromebooks and mobile, Windows is still a cash cow with revenue from Windows OEM Pro up 15% year on year. Consumer revenue is down 1%.

In the earnings call CEO Satya Nadella called out Teams as “bringing together everything a team needs” (well, apart from a proper shared calendar).

CFO Amy Hood remarked on what she called “strategic areas” by which she means I think areas that drive adoption:

We will invest aggressively in strategic areas like Cloud through AI and Github, Business Applications through Power Platform and LinkedIn, Microsoft 365 through Teams, Security, and Surface as well as Gaming.

Note that Github is seen as a way of persuading developers to use Azure services, and note also the important attached to the Power Platform. Power platform? Here it is:

The Power Platform is today comprised of three services – Power BI, PowerApps and Flow … It is a system that enables users to do three key actions on data that help them drive business: Analyze, Act, and Automate. We do this with Power BI, PowerApps, and Flow, all working together atop your data to help EVERYONE, from the CEO to the front-line workers, drive the business with data.

says CVP James Phillips.

The piece that particularly interests me is PowerApps. Microsoft spent years looking for a modern successor to Visual Basic, app development within reach of non-specialists (kind-of). In PowerApps it believes it has the answer:

PowerApps is a “citizen application development platform” – allowing anyone to build web and mobile applications without writing code. The natural connection between Power BI and PowerApps makes it effortless to put insights in the hands of maintenance workers, teachers, miners and others on the frontline, in tailored and often task-specific applications

says Phillips.

So if VB was a driver for Windows adoption, then PowerApps will push you towards Microsoft’s cloud-hosted business applications.

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