Microsoft FY20 Financial Results

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Microsoft had, as expected, a great Q4 with revenue up 13% to $38 billion, which closed out an equally good fiscal year. Overall revenue of $143 billion, and operating income of $44.3 billion, was driven by revenue increases in all Microsoft’s key areas:

  • Office 365 was up 19%
  • Dynamics 365 was up 38%
  • LinkedIn increased by 10%
  • Azure was up 47%

Although the Azure growth was lower than previous quarters, it still seems healthy enough for now.

Microsoft called out some interesting points during their earnings call, some of which give a good indication of future direction including:

Slowdown in transactional licensing and flat on-premises server revenue: While this may be down, at least in part, to the impact of COVID-19 – it is also where Microsoft are heading. This is also shown by the fact that Office Commercial (on-premises Office) was down 34% -which Microsoft attributed to a combination of COVID-19 and the move to annuity licensing.

As long as those transactional licenses and on-premises server software are being replaced by CSP, Microsoft 365, and Azure – Redmond will be happy. I’ll be keen to see if this numbers start to rise again as the economic situation stabilises.

Bigger, longer Azure contracts: They stated “material growth” in Azure contracts over $10 million which is good news for Microsoft. For everyone in this new subscription based world, locking customers in to longer term deals is a key aim as it makes it easier for the vendor to forecast and budget.

Increased ARPU for Office 365: Average Revenue Per User (ARPU) is a key metric for many of today’s organisations and an increase means Microsoft are making more money per user. This could be as they upgrade to higher level plans (E3 to E5 for example) or purchase add-ons to their existing licenses. The Office 365 seat count increased and the ARPU increased, which are both positive for Microsoft.

All in all, a very positive performance from Microsoft that clearly shows their focus on cloud continues to pay off. Looking ahead to this financial year, FY 21, I think we’ll see more focus on E5 – particularly for security and voice workloads, Power Platform continuing to appear in new places, and increased pressure on those organisations looking to remain on-premises.

See the Microsoft press release and figures here.

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