Category: Uncategorized

Microsoft’s financial results for the 2nd quarter of FY23 (Oct – Dec 22) don’t make the usual pretty reading this time.

Revenue was $52.7 billion – an increase of just 2%

Net income was $16.4 billion – a decrease of 12%

That’s the first decrease for a long time, showing even Microsoft are not immune to the impacts of rising costs and global recessions. However, it’s not all doom and gloom:

Productivity & Business Processes

Revenue = $17 billion…up 7%

• Office 365 Commercial revenue up 11%
• LinkedIn revenue up 10%
• Dynamics 365 revenue up 21%

All increases but quite a bit lower than we’re used to from previous quarters. Office Commercial (i.e. on-premises) has dropped 30% as customers continue to move to the cloud.

Intelligent Cloud

Revenue = $21.5 billion…up 18%

• Azure = 31% up

In most scenarios, 31% growth is good, great even…but not for Azure after a couple of years of 50%+ growth! Although the most recent quarters dipped just below that 50% marker, this quarter still represents a significant drop. Microsoft do mention higher energy costs as a factor in the decreased margin.

Earnings call

There are now 12,000 Azure Arc customers, a 100% increase in 12 months.

45,000+ Power Automate customers – a 50% increase over last year.

Satya Nadella mentions new functionality to build workflows from natural language prompts…that would be really useful for me!

280 million Monthly Active Users (MAU) for Teams

Teams Phone added over 5 million PSTN seats in the last 12 months and is the market leader

Microsoft Security is now over $20 billion and Nadella states they’re taking market share in all the major categories. He also states that a customer has consolidated from 10 security vendors down to just Microsoft – this is something I often advise that organisations explore.

EMS is now at 241 million seats.

Overall, LOTS of mentions of AI from Satya Nadella (as expected) and a real focus on the future with AI, Platforms, Viva, E5 and more. The expectations for future growth and advances seem to more than outweigh the slight disappointment of these results.

You can se the Microsoft details here.

Picking up where they left off in 2022, Microsoft have announced today (Jan 5, 2023) further price increases that will take effect from April 1, 2023.

Microsoft cloud products will be increased as follows:

GBP – up 9%

DKK, EUR, and NOK – up 11%

SEK – up 15%

I’m looking to clarify if these are the same as, or additional to, the “price harmonisation” increases that were announced a few months ago.

Microsoft announcement here.

Post on other price increases here.

Sign up to my monthly Microsoft newsletter here.

A very quiet month as you’d expect – the 2 main updates are:

Clarification that Microsoft Defender for Endpoint/Cloud/Business products can be used on devices running on-premises, in Azure, and under the control of 3rd-parties

Information added about the EU data boundary service – see more here

What is it?

The EU Data Boundary is a geographical area within which Microsoft has committed to store and process customer data for the majority of their online services. This is aimed at addressing concerns around data processing/location and GDPR, held both by customers and organisations such as the European Union.

It is comprised of countries in the EU:

and EFTA:

For my fellow Brits, notice the United Kingdom isn’t included #Brexit

Currently, datacentres in the following countries are being used:

although Microsoft may add additional datacentres within the EU/EFTA over time.

How it works

Azure

Regional resources deployed within an EU Data Boundary region will be in-scope. For non-regional services, there is info here on how these can be configured within the EU Data Boundary. Note, not all services have yet been re-architected to allow this.

Dynamics 365 & Power Platform

This is based on the location of your billing address and, this, tenancy.

Microsoft 365

If you have a billing address within the EU/EFTA, you’re in scope…unless you have purchased the Multi-Geo capabilities add-on license.

Which products are in-scope?

According to the January 2023 Product Terms, the EU Data Boundary can apply to these products/services:

The Product Terms also lists half a dozen scenarios where data may still go outside the EU Data Boundary, these being:

• Remote access by MS employees
• Customer-initiated transfers
• Protecting customers
• Replication of Azure AD directory data
• Network transit
• Service-specific transfers

More info

Microsoft EU Data Boundary page

Configure non-regional Azure services

Microsoft announced their results for FY22 Q4 and the full year and, as expected, the numbers are big and the percentage increases are (mostly) double digits. For the full year, revenue was $198.3 billion (an increase of 18%) and operating income was $83.4 billion (up 19%).

There were a few different things that negatively impacted the numbers in Q4 including:

• Exchange rate changes – many of the “constant currency” growth figures are 5 or 6% higher than actual
• COVID shutdowns in China cost over $300 million of Windows OEM revenue
• Scaling back in Russia cost $126 million
• An interesting one this – due to a “strategic realignment of…business groups”, Microsoft spent $113 million on employee severances.

but let’s take a look at some of the highlights for Q4:

FY 22 Q4

• Revenue for the final 3 months was $51.9 billion, an increase of 12%.
• Operating income was $20.5 billion, up 8%

Productivity & Business Processes

• Revenue = $16.6 billion (up 13%)
• Office 365 Commercial up 15%
• LinkedIn up 26%
• Dynamics 365 up 31%

Intelligent Cloud

• Revenue = $20.9 billion (up 20%)
• Azure up 40%

Earnings call highlights

• Cosmos DB grew 100%+ YoY each quarter in FY22
• 25 million Monthly Active Users (MAU) for Power Platform
• Office 365 E5 is now 12% of the installed base (up from 8%)
• Security revenue up 40%
• Azure Virtual Desktop MAU almost 60% YoY increase
• Office on-premises down over 30%
• 25% of Fortune 500 using Viva

All these product areas are doing what Microsoft want them to do. As well as them innovating and creating products in the right areas, it also shows that their sales activities – direct and through partners – are paying off.

They said that E5 was strong both for renewals and new additions and Amy Hood mentioned they’re focusing on deployment and increasing usage of the suite. This makes sense as there are so many components of E5 these days that even customers getting value from E5 – typically via Office, Power BI, and a bit of security/telephony – have got some much more they could be using. I’d expect partners will be incentivized to get their customers utilising more of the E5 suite and it may mean that customers can use it to their advantage to extract concessions, POC funding etc. from partners and/or Microsoft.

On a similar note, Satya Nadella mentioned that Microsoft are now incentivizing their field sales teams to ensure that customer’s Azure bills “come down” through optimization efforts. This is a good thing to see from a cloud vendor and will hopefully lead to some legitimate savings for customers.