Microsoft gets boost in SaaS revenue and pushes Teams platform

Microsoft has reported revenue of $33.4bn for the fourth quarter 2019, an increase of 12% on the equivalent quarter last year.

The company said its Commercial Cloud business achieved annual revenue of $38bn, and grew by 39% in the quarter with revenue of $11bn, while its Intelligent Cloud business grew by 19% with revenue of $11.4bn.

The company also reported growth of 23% in the number of commercial Office 365 seats and strong demand for Windows 10 among commercial PC manufacturers driven by end of support for Windows 7 in January 2020.

Satya Nadella, chief executive officer of Microsoft, said: “Every day we work alongside our customers to help them build their own digital capability – innovating with them, creating new businesses with them, and earning their trust. This commitment to our customers’ success is resulting in larger, multi-year commercial cloud agreements and growing momentum across every layer of our technology stack.”

During the earnings call, Nadella described Teams as Microsoft’s fastest-growing platform. “There is no question this last fiscal year has been an absolute breakout year for Teams in terms of both product innovation and, most importantly, at-scale deployment and usage,” he said. “And unlike any other time other than Windows, we’ve not had this kind of platform effect.

“Office has obviously had very, very successful individual products that have been deployed broadly, but each of them was a singular tool. Perhaps SharePoint was the last time we had a platform effect of this kind.

“But Teams transcends all that. It’s the communications tool, it’s the collaboration tool, it’s the line of business tool for meetings as well as business process. And so, the amount of value creation for the customer by deployment is something that we ourselves are sort of really learning a lot each deployment, whether it’s on the first line.”

The transcript of the earnings call was posted on the Seeking Alpha financial blogging site.

John Dinsdale, chief analyst and research director at Synergy Research Group, said: “Microsoft’s strong market position is due to having a big presence and market share in all regions of the world.”

Dinsdale said the company is a clear number two in cloud infrastructure services (IaaS, PaaS, hosted private cloud), but is still a long way behind Amazon Web Services (AWS). However, it is the market leader in SaaS, he pointed out.

“Microsoft is a very clear market leader in the SaaS market and its growth rate is above the overall market growth rate,” said Dinsdale. “The SaaS market is more fragmented than cloud infrastructure services, but Microsoft still has a 17% share of the worldwide market. Its market share continues to increase by around a percentage point per year. It remains well ahead of Salesforce, Adobe, SAP and Oracle.”