Is Microsoft experiencing a decline in its cloud market growth?
Annual revenue reached over $245 billion, a 15% increase year over year, with an operating margin of 44.6%. Microsoft's cloud revenue exceeded $135 billion, up by 23%.
This quarter, revenue was $64.7 billion, up 15% and operating margin of 43%.
Microsoft Cloud's revenue was $36.8 billion and grew 21%, while its gross margin percentage decreased roughly 2 points year over year to 69%.
Capital expenditure
Capital expenditures, including finance leases, totalled $19 billion. Nearly all of this expenditure is dedicated to cloud and AI-related projects. Half of it will be used to build and lease data centers, while the remaining expenditure will be primarily for servers, including both CPUs and GPUs, to meet customer demand signals.
Results by Segments
Productivity and Business Processes: Revenue was $20.3 billion and grew 11%. Office 365 commercial revenue increased 13%, with ARPU growth primarily from E5 momentum as well as Copilot for Microsoft 365
Intelligent Cloud segment. Revenue was $28.5 billion, increasing 19%. Server products and cloud services revenue grew by 21%. Azure and other cloud services revenue grew 29%. Azure growth included 8 points from AI services where demand remained higher than available capacity.
Product Snippets
Observations
Microsoft is strategically integrating its copilot product into a wide range of its product offerings across various markets, highlighting the importance of AI in the company's overall growth.
The cloud computing market has undeniably matured, with AI firmly establishing itself as a critical component of its growth.
The company is making substantial capital investments in cloud and AI to assert its dominance in the competitive AI market.
