Microsoft have revealed that the previously announced end of Azure Compute Reservation exchanges has been postponed “until further notice“. They say:
“You may continue exchanging your compute reservations for different instance series and regions until we notify you again, which will be at least 6 months in advance. In addition, any compute reservations purchased during this extended grace period will retain the right to one more exchange after the grace period ends.”
Let’s look at the numbers and main takeaways from Microsoft’s FY24 Q2 earnings. Not surprisingly, there’s a lot of talk about AI with Satya Nadella saying:
“We’ve moved from talking about AI to applying AI at scale.
By infusing AI across every layer of our tech stack, we’re winning new customers and helping drive new benefits and productivity gains.”
Headline numbers
Revenue = $62 billion (increase of 18%)
Net Income = $21.9 billion (increase of 33%)
Within that, what they call “Microsoft Cloud” accounted for $33.7 billion of the revenue – an increase of 24%.
Productivity & Business Processes
Revenue = $19.2 billion (increase of 15%)
Office 365 Commercial up 17%
LinkedIn up 9% (better than expected)
Dynamics 365 up 27%
Intelligent Cloud
Revenue = $25.9 billion
Azure growth was 30% this quarter. That’s 1% higher than last quarter although, in constant currency (where the impact of exchange rates is minimised) it was 28% i.e. 1% lower. Either way, it’s strong growth from Azure again, in no small part thanks to 6 percentage points added by AI.
Side note: The latest quarterly results for Amazon AWS (Q4 FY23) was $24.2 billion -so Azure is, for the first time I think (?), bigger than it’s long standing – and still market leading rival…at least on a quarterly basis.
Earnings Call Highlights
Over 53,000 Azure AI customers and over 1/3 of them are new Azure customers within the last 12 months.
Nadella mentions “an increase in the number of billion-dollar-plus Azure commitments“, citing Vodafone’s $1.5 billion commitment over the next 10 years.
Cosmos DB gets another shout out – and 42% YoY increase in data transactions…definitely a golden child product at the moment.
Over 400 million paid Office 365 seats which is a 9% YoY increase, primarily driven by SMB and Frontline SKUs.
On-premises server revenue increased 3% – driven by Windows Server 2012 end of life. That could be customers upgrading to newer versions but I’d wager a lot of it is Extended Security Update (ESU) revenue…
Nadella mentions the upcoming dedicated “Copilot” key on new Windows devices…
I’ve recently recorded a couple of videos with Nathan Miller, Microsoft Program Manager at Bytes.
In the first, we discuss Copilot for Microsoft 365 (we recorded this in October 2023 but it took me ages to edit it!):
We talk about the General Availability of Copilot for M365 as well as tips for preparing for deployment.
We then talk about the Microsoft Azure Consumption Commitment (MACC): agreement:
where we explain what the MACC agreement is, how it works, and the potential pros and cons for customer organisations. We also talk about the Azure cloud marketplace and the impact this will have on customer procurement processes and also the wider IT channel.
I hope you find the videos useful and informative – as there are more planned! Let me know if you have requests for topics and also if you’d like to jump on a video or podcast with me at some point. I usually focus on blog posts but am looking to get all multimedia on you in 2024 so this is just the start 😁
Update to terms around add-on USLs being purchased on same agreement. It now says “Add-on User SLs, as specified in the Add-ons section of each respective product section,”
New Failover rights for Azure SQL database = “One geo-secondary specifically for disaster recovery purposes“
It has also been spotted that M365 Business Standard and Business Premium have been removed from the license prerequisites for Copilot for Microsoft 365:
Is this a temporary removal to prevent confusion as it is isn’t currently available for those licenses…or is it a sign that M365 Copilot won’t be available for SMB customers? I feel it’s the former but you never know!
Microsoft have announced their financial results for Q1 FY24 (July – Sept 2023) so let’s dive in and take a look.
Overall revenue was $56.5 billion, a 13% increase Year on Year (YoY), while net income was up 27% to $22.3 billion. The “Microsoft Cloud” revenue hit $31.8 billion which was a 24% increase.
Productivity & Business Processes
Revenue = $18.6 billion, up 13%
Office 365 Commercial = up 13%
Dynamics 365 = up 29%
Office 365 growth is primarily driven by SMB and Frontline SKUs.
Intelligent Cloud
Revenue = $24.3 billion, up 19%
Azure growth was 29% which is the first time for 2 year that the rate of growth has increased quarter on quarter. Q4 FY23 was 26% and now it’s at 29% which shows that spend in Azure is picking up at a newly increased speed.
Earnings call highlights
Azure Arc up to 21,000 customers – a 140% increase YoY. <– How much of this is driven by the new PAYG ESUs and Microsoft’s push?
16,000+ customers using Microsoft Fabric.
20 million Monthly Active Users (MAU) for Power Apps.
Total headcount is 7% lower than 1 year ago.
Satya Nadella gives a shoutout to the newly announced Oracle@Azure program as a driver of cloud growth:
“Once we announced that the Oracle databases are going to be available on Azure, we saw a bunch of unlock from new customers who have a significant Oracle estate that have not yet moved to the cloud, because they needed to rendezvous with the rest of the app estate in one single cloud”
Interesting to see Oracle contributing to Microsoft’s growth!
Lots of talk of AI throughout, looking ahead to the launch of M365 Copilot on November 1st.
It’s clear that Microsoft are in a strong position and it looks like growth will continue for the foreseeable. Yes there’s a lot of volatility in the world, both economically and politically, but Microsoft have first mover advantage on per-user generative AI for business users with Copilot as well as several other growing products.
Microsoft have announced that Azure Container Apps are now eligible for coverage with Azure compute savings plans, receiving discounts of 15% and 17% with the 1 year and 3 year plans respectively.
With savings plans, you commit to an hourly amount of Azure spend (say £5) and then any eligible services you use receive the discounted rate up to that amount. Anything over £5 will be charged at the regular PAYG rate:
Microsoft recently announced the option to license Extended Security Updates (ESU) for Windows Server & SQL Server via Azure Arc, enabling a monthly Pay As You Go (PAYG) model.
The public pricing page here shows different pricing for Standard edition and Datacenter edition:
As you’d expect, ESUs for Standard edition are significantly cheaper than for Datacenter.
What you wouldn’t expect, or at least I didn’t (!), is this:
When you license ESU for Windows Server via Azure Arc and choose the “vCore licensing” option – which is based on the number of virtual cores being used – Microsoft allows you to pay the Standard edition rate “irrespective of how the underlying server or operating system is licensed”.
From January 1, 2024* it will no longer be possible to exchange reservations for:
Azure Reserved Virtual Machine Instances
Azure Dedicated Host reservations,
Azure App Services reservations
purchased on or after that date. For reservations purchased before that date, you will have the option to exchange once after the cut-off date. There is no limitation being put on trading in reservations for Azure Savings Plans, that will still be perfectly possible.
Ensure you do a review of your Reserved Instances, and how you use exchanges, prior to the end of 2023. If you find a lot of exchanges take place, it’s worth understanding why and what changes you may need to make to processes going forward.
*Update*
Microsoft have extended the deadline to “at least” July 1, 2024, giving organisations at least a further 6 months to get on top of they Azure reservations needs and strategy.
You can see more about the change and grace period here.
For more answers, advice, and insights into Microsoft licensing for you and your organisation – get in touch here:
Cloudy with a chance of Licensing 