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Partner Tidbits in Microsoft's Second Quarter Earnings

Behind Microsoft's latest earnings results, which pleased financial analysts even if they didn't do much for the stock price, were a number of directional hints and other key details for Microsoft partners.

CEO Satya Nadella summarized the big picture for the quarter, which included a 12% increase in revenues to $28.9 billion and a 10% bump in operating income to $8.7 billion, this way: "The intelligent cloud and intelligent edge paradigm is fast becoming a reality. Azure growth accelerated. LinkedIn growth accelerated. Microsoft 365 and Dynamics 365 are driving our growth and transforming the workplace."

The solid results come despite the turmoil in the sales organization related to the massive, layoff-heavy reorganization of the Microsoft field during the last year. The upheaval was severe enough to merit a mention during the call for financial analysts by Microsoft CFO Amy Hood, who partly credited partners for soldiering through the transition.

"Our sales teams and channel partners delivered another quarter of outstanding commercial results even as we continue to work through our sales reorganization from July," Hood told the analysts Wednesday night.

"The intelligent cloud and intelligent edge paradigm is fast becoming a reality. Azure growth accelerated. LinkedIn growth accelerated. Microsoft 365 and Dynamics 365 are driving our growth and transforming the workplace."

Satya Nadella, CEO, Microsoft

For any partner that hasn't heard the cloud message that Microsoft has been delivering since, oh, 2006, Microsoft continued to push that flywheel during the analyst call, as well. Specific to Nadella's overview comment about accelerating Azure growth, Azure revenues were up 98%.

Following up on Nadella's high-profile commitment to reach a $20 billion annual run rate for commercial cloud revenue, which Microsoft hit in its last quarterly earnings period, Microsoft is now blasting past that number. Hood said commercial cloud revenue for the second quarter hit $5.3 billion, which amounted to a 56% year-over-year improvement.

Commercial revenues for Office 365, one of the most important business areas for the Microsoft channel, also continue to surge. Those revenues went up 41% in the quarter, attributable both to installed-base growth and upselling to the E3 and E5 workloads that Microsoft heavily encourages its partners to peddle.

Hood said Office 365 commercial seats were up 30% and, in response to an analyst question, said that Microsoft believes there is still a lot of growth opportunity with Office 365.

Meanwhile, Dynamics partners can expect pipeline check-in calls from their Microsoft partner management teams surrounding Hood's forecast for the next quarter. "We expect double-digit Dynamics revenue growth from the shift to Dynamics 365," she said.

The technical terms that break the surface in the earnings call provide a window into which technologies have strategic emphasis in Redmond. Nadella's technology namechecks this quarter included Microsoft 365, Cosmos DB, LinkedIn Sales Navigator, Dynamics 365 for Sales and Talent, the Profile Card, Resume Assistant, Azure Databricks, SQL Server for Linux, Azure IoT Central, Surface LTE, Teams and Cortana.

Posted by Scott Bekker on February 01, 2018 at 9:31 AM


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