Wade Tyler Millward
‘Public cloud is the big winner in all of this because public cloud helps businesses offset the risk of demand risk,’ says Microsoft CEO Satya Nadella.
Cloud vendors have finally acknowledged that a slowing economy is affecting their profits, but Microsoft CEO Satya Nadella sees a weaker global economy as the opportunity to create the need for public cloud.
A public cloud allows Microsoft customers to control ramping up and ramping down based on demand, which could also help customers with growing energy costs, Nadella said during Microsoft’s latest quarterly earnings call.
“The thing is, though, from the customer’s perspective — the best way for them to align their spending with uncertain demand is to move to the cloud,” Nadella said. “So we see the value of supporting the cloud. So public cloud is the big winner out of all this because public cloud helps businesses offset the risk of demand risk.”
[RELATED: Microsoft Reports PC Trouble, Cloud Growth, SMB ‘Deal Moderation’]
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While Microsoft Chief Financial Officer Amy Hood handled much of the bad financial news during the company’s earnings report for the first quarter of the company’s fiscal year 2023 — the quarter that ended Sept. 30 — Nadella still had plenty of action to show the company’s growth 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 grown more than 100 percent for four consecutive quarters. And GitHub is at $1 billion in annual recurring revenue with more than 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 Office 365/Windows ecosystem under the Redmond piece will become more and more important going forward and will ultimately drive growth and margins (and the multiple) into FY23 / FY24 in despite this downturn,” Wedbush wrote in a report Wednesday. “We believe the move to the cloud is still less than 50% penetration and a huge opportunity for Nadella & Co. In the future.”
He continued: “Our conversations with customers and partners show our confidence that MSFT can weather this economic storm and ultimately come out in a stronger position on the other side with cost cutting and strategic measures already in place. “
A Wednesday report from investment bank KeyBanc said “despite cyclical headwinds to Azure and Windows/PCs, we remain bullish long-term on MSFT’s hyperscale cloud and integrated infrastructure stack, application development platform, and growing business application portfolio.”
A report from Credit Suisse said that while there is a slowdown in SMB consumption and that the slowdown is going towards Microsoft’s Enterprise Mobility + Security business.
“It is likely to continue to put pressure on near-term growth, we consider the negative impact of the current uptrend cycle to be more temporary. Similar to past optimization cycles that impacted growth for ~1-2 quarters, new workloads followed and drove growth back toward more normalized trends.”
Here’s more of what Nadella had to say during Microsoft’s latest earnings call.