Businesses Flock to Microsoft's Cloud

Making all the right moves? Microsoft reports that healthy demand for its cloud-based offerings is improving its bottom line.

Microsoft cloud

Amazon and Salesforce may be the poster children of the cloud computing era, but Microsoft is quickly catching up.

Yesterday, the Redmond, Wash.-based software maker reported fiscal 2014 fourth-quarter revenue of $23.38 billion, just above Wall Street estimates of $23 billion. Profits disappointed at $4.6 billion, or $0.55 per share, below the 60 cents financial analysts expected.

While the Nokia acquisition weighed down profits, the cloud continued to drive business at the company. "I'm proud that our aggressive move to the cloud is paying off—our commercial cloud revenue doubled again this year to a $4.4 billion annual run rate," said CEO Satya Nadella in a statement.

Microsoft is a company in transition as both business users and consumers increasingly shift from PCs and packaged software to smartphones, tablets and cloud services for their computing needs.

In the smartphone market, it is a distant third behind Google and Apple. While generally well-regarded, the company's line of Surface tablets has done little to knock the iPad off its market-leading perch.

One area where the company is finding success is cloud computing, however. During a July 22 earnings conference call, Amy Hood, Microsoft's chief financial officer, reported "significant momentum with our cloud services." Commercial cloud revenue increased by a whopping 147 percent during the quarter, "driven by both Office 365 and Azure," she added.

Azure, Microsoft's cloud computing platform, has "grown dramatically," said Hood. According to the company's estimates, storage doubled and compute tripled this year. Businesses are doing more than storing, sharing and syncing files on Azure, she indicated.

Hood revealed that over 50 percent of Azure customers are "also using higher-value services like the Enterprise Mobility Suite, which has seen strong adoption since the May launch." Microsoft unveiled the Enterprise Mobility Suite (EMS), a cross-platform cloud-based mobile device management platform, on March 27 during Nadella's first major press event as CEO.

In general, demand is brisk across the company's cloud portfolio, said Hood. Microsoft is pleased that "customers are enthusiastically embracing Office 365, Azure, CRM Online and our other cloud services, especially considering it's still early in the cloud transition."

The company is also poised to capitalize on shifting IT market dynamics as a provider of building blocks for enterprise cloud-based workloads, Nadella said. "Azure, StorSimple, InMage and data center editions of our server products across Windows Server, System Center and SQL Server all help us participate in the cloud growth," he said during the call.

"The fact that we use our servers to run our cloud makes our server software the most capable in enabling others to build and operate their clouds," he said. Without expressly mentioning VMware, he did note that its Hyper-V virtualization platform is making steady gains. Hyper-V's share of the market "is now at 30.6 percent, and has helped grow data center editions of Windows Server and System Center, both up more than 40 percent for the year," he said.

Nadella also noted some recent Azure-related acquisitions, including big compute specialist GreenButton, mobile analytics provider Capptain and InMage, a cloud-based business continuity vendor.

Expect the company to pump more money into its cloud data centers, said Hood. "Investments in cloud infrastructure are necessary to support and enable the significant growth and momentum in our cloud services," she said. During the current quarter, the company expects "Capex to increase sequentially to further support [its] growth."

Pedro Hernandez

Pedro Hernandez

Pedro Hernandez is a contributor to eWEEK and the IT Business Edge Network, the network for technology professionals. Previously, he served as a managing editor for the network of...