Wade Tyler Millward
“The big winner in all of this is going to be the public cloud because the public cloud helps businesses offset the risk of demand risk,” says Microsoft CEO Satya Nadella.
Cloud vendors have finally acknowledged that a declining economy has affected their profits, but Microsoft CEO Satya Nadella sees a weaker global economy as a chance to prove the need for a public cloud.
A public cloud allows Microsoft customers to control ramping up and ramping down based on demand, which could also help customers with rising energy costs, Nadella said during the latest quarterly earnings call of Microsoft.
“The thing, though, from the customer’s perspective — the best way for them to align their spending with what is uncertain demand is to move to the cloud,” Nadella said. “So we see the real value of the cloud. So the big winner in all of this is going to be the public cloud because the public cloud helps businesses offset the risk of demand risk.”
[RELATED: Microsoft Reports PC Trouble, Cloud Growth, SMB ‘Deal Moderation’]
How is Microsoft doing?
While Microsoft Chief Financial Officer Amy Hood dealt with much of the financial bad news during the company’s earnings report for the first quarter of the company’s fiscal year 2023 – a quarter that ended on 30 September – Nadella still had many measures to show the growth of the company with established and new products.
Azure Arc has more than 8,500 customers, more than double from a year ago, Nadella said. Azure Machine Learning revenue has increased by more than 100 percent for four consecutive quarters. And GitHub is $1 billion in annual recurring revenue with over 90 billion people using the service.
At least three investment banks have reported confidence in Microsoft’s long-term capabilities.
“Our thesis remains that the cloud and the underlying Office 365/Windows ecosystem will comprise a larger and larger piece of Redmond going forward and will ultimately drive growth and margins (and the -multiple) in FY23/FY24 despite this decline,” Wedbush wrote. in a report Wednesday. “We believe the shift to the cloud is still less than 50% penetrated and represents a huge opportunity for Nadella & Co. going forward.”
She continued: “Our conversations with clients and partners underscore our confidence that MSFT can weather this economic storm and ultimately be in a stronger position on the -other with cost reductions and strategic measures already in place.”
A Wednesday report from investment bank KeyBanc said that “despite cyclical headwinds for Azure and Windows/PCs, we remain long-term bullish on MSFT’s hyperscale cloud and infrastructure stack integrated, application development platform, and an expanding portfolio of business applications.”
A report from Credit Suisse said that although a slowdown in small and medium-sized business consumption and headwinds to Microsoft’s Enterprise Mobility + Security business
“It will likely continue to weigh on growth in the near term, we consider the negative impact of the currently elevated optimization cycle to be more temporary. Similar to past optimization cycles that weighed on growth for ~1 -2 quarters, then followed an increase in new workloads which led growth back towards more normalized trends.
Here’s more of what Nadella had to say during Microsoft’s latest earnings call.