HomeWinBuzzer NewsMicrosoft Says Its Slowing Azure Growth Is Partly a Numerical Misconception

Microsoft Says Its Slowing Azure Growth Is Partly a Numerical Misconception

Microsoft executives took the time to explain several aspects of its strong Q4 2019 earnings report, covering slowing Azure growth, and the role of gaming in the company's strategy.


Microsoft has assured investors that the slowing percentage growth of its Azure services doesn’t show the whole picture. After its Q4 2019 report, many noted that cloud revenue growth had fallen from 75% to 73%, and now 64%.

However, general manager of investor relations Mike Spencer says the dwindling percentage is at least partially due to the law of large numbers. In a conference call (via ZDNet), Spencer explained that the bigger Azure gets as an overall business, the slower the percentage ticks up. He also pointed out that in constant currency, Azure is up a closer 68%, though enterprise mobility and security is now growing more moderately in line with expectations and the Office 365 trajectory.

Of course, revenue does not translate directly to business success. In many cases, the more important factor is the margins Microsoft makes on its Azure sales. Spencer says the company is “continuing to get scale and find efficiencies in the business,” as it signs large multi-year contracts, optimizes its data center structure, and improves its customer support.

Notably, the firm’s Intelligent Cloud segment produced more revenue than its Office and Windows segments for the first time in over three years. This is especially remarkable given that Windows revenue increased this quarter as enterprises switch from Windows 7 to 10.

A Strong Future in Gaming?

When it comes to the gaming business, after a 10% revenue dip, CEO Satya Nadella was asked where he sees it fitting into the company’s overall gameplan over the next few years.

“We are in gaming because of what we believe are going to be the secular changes in the gaming-addressable market for us. We’ve always had a gaming position with console, as well as the PC, but going forward, we think any end-point can be a great endpoint for high-end games, which is where our structural position is.”

“We now have a business model with GamePass, as well as all the supporting mechanisms like game streaming[…] So I feel we are well-positioned to what is going to be a much larger market than what was traditionally gaming.”

Nadella also noted that its gaming business builds on Azure, with its game streaming infrastructure now in use by Sony, who will be on Azure and use its AI capabilities. You can listen to the full conference call here, which has a number of other notable explanations.

Ryan Maskell
Ryan Maskellhttps://ryanmaskell.co.uk
Ryan has had a passion for gaming and technology since early childhood. Fusing the skills from his Creative Writing and Publishing degree with profound technical knowledge, he enjoys covering news about Microsoft. As an avid writer, he is also working on his debut novel.

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