Microsoft Q4 2019 Earnings Show Growth in Surface As Azure Growth Slows Down

Posted on July 18, 2019 by Mehedi Hassan in Cloud, Microsoft, Microsoft Consumer Services, Microsoft Surface, Office 365 with 19 Comments

Microsoft is today reporting its FYQ4 earnings for 2019. The company is reporting a revenue of $33.7 billion, net income of $12.4 billion, and an operating income of $12.4 billion.

There are a couple of interesting points from the earnings report, here’s a quick breakdown:

  • Surface revenue has grown by 14%, totalling $1.3 billion. Microsoft says the growth is driven by strong growth in its commercial segment, and it’s pretty impressive considering we haven’t seen the launch of a major new Surface device in recent times.
  • Azure revenue grew by 64%, with Microsoft’s entire Intelligent Cloud business bringing in $11.4 billion in revenue, seeing a 19% increase. Azure’s 64% growth this quarter is still the lowest in recent times, declining from the 73% growth it experienced in FYQ3.
  • Gaming revenue declined by 10%, with Xbox software and services revenue also declining by 3%. Microsoft says the 48% decline in Xbox hardware revenue was primarily due to a decrease in volume of consoles said. Xbox Live monthly active users still saw an increase of 14%, bringing the active user count up to 65 million.
  • Windows OEM Pro revenue grew by 18%, driven by “healthy Windows 10 demand” and partly because of Windows 7 reaching end of support. Windows OEM non-Pro revenue, however, declined by 8%, apparently because of “continued pressure” in the entry-level category.
  • Office Commercial products and cloud services revenue increased by 14%, with Office 365 Commercial revenue growing by 31%. Revenue generated by Office Commercial products, however, declined by 17% as more customers are switching to the cloud-based services.
  • Revenue generated by Office Consumer products and cloud services grew by 6%, with Office 365 Consumer subscribers growing to 34.8 million. LinkedIn also saw a strong growth of 25% in revenue, and Dynamics 365 revenue grew by 45%.
  • Last but not least, Microsoft’s Search advertising business saw an increase of 9% in revenue.

Overall, Microsoft’s had a really good quarter, with growth across the board for almost all its businesses. Although performance in its gaming business may disappoint some, that’s likely because of the lack of any new hardware from Microsoft as it’s getting ready to unveil the future of Xbox. The growth in Surface, Azure, Windows, and Office continues to bring in lots of money for Redmond, keeping up its market cap of $1 trillion.

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Comments (19)

19 responses to “Microsoft Q4 2019 Earnings Show Growth in Surface As Azure Growth Slows Down”

  1. Avatar

    MikeGalos

    And currently up 2.65% in after hours trading on that news despite the scare headline about Azure growth being "only" 64%...


    • Avatar

      jrickel96

      In reply to MikeGalos:

      Their margins are improving in Azure as well. From what I've seen, they probably have the healthiest margins of any of the large Cloud companies. AWS has much better margins, but Amazon has cut a lot of corners in AWS. Their Dashboard is terrible and the entire system is pretty duct-taped together. AWS is still very good, but I really have a nagging feeling that something truly catastrophic is going to happen with AWS in the next five years that will hurt a lot of companies. Amazon just has to keep running it like they run their retail business to keep shareholders happy with those high margins - and eventually it will bite them because they are not really investing in the infrastructure or support as they should.

  2. Avatar

    skane2600

    In reply to locust infested orchard inc:

    The only relevance either Apple or Google have with the success or failure of a Surface Phone is their dominant position in the market. One doesn't need to be fanboy of either of them to recognize the challenge Microsoft would have in selling it (My one smartphone is a Windows Phone).


    In some ways, It's hard to be objective in evaluating a Surface Phone because it doesn't really exist, but the question is, what compelling feature would it have that would make it sufficiently superior to iOS or Android phones that it could compete with them? The main reason why more recent Surface devices have succeeded while the original failed was because the former had full Windows compatibility, but even if a Surface Phone included that feature, the ergonomics are still wrong to run most Windows programs.

  3. Avatar

    garrygbain

    A nice Surface Phone would complete the Surface Family. What are they waiting for...

  4. Avatar

    wright_is

    Azure slow down is to be expected as the market matures, plus recent US Government actions have made it hard for non-US companies to consider using cloud services with a US presence.

    With the Cloud Act and the recent Huawei action, it has shown that cloud services with a US presence are an untenable risk.

  5. Avatar

    Sam Knight

    Surface Phone, I can only dream. Over Android & iOS, they need a shake up.

    • Avatar

      Andi

      In reply to knightmeister:

      That is not possible. It's too late to start over. They could approach Android in the same way they approached Chromium for the new Edge. A custom Android with the Google bloat eliminated.

      • Avatar

        Sam Knight

        In reply to Andi:

        This will probably be missed, but really they just need to make it possible to run Project Astoria on Windows Mobile. Yes, they'll be Android apps but it will solve the app problem. PWAs are much more practical now than they were 5 years ago as well.

  6. Avatar

    TEAMSWITCHER

    Surface desperately needs a better attitude... First, Microsoft's website doesn't list the processor models in the detailed specs - its evasive marketing. Every Surface device should have Thunderbolt 3 support by now, and there should be more flexible storage and RAM options for the entry level SKU's. Want a 1TB SSD in your Surface Laptop 2? You can get it in any color ... as long as it's Silver.


    Every time I go to Microsoft's website to consider buying a Surface ... I abort the process in frustration. Even the lowly MacBook Air has TWO Thunderbolt 3 ports. Ultimately.. I rather have one of those.

    • Avatar

      Andi

      In reply to TEAMSWITCHER:

      Stop with the TB insanity. TB is a niche that no one in the Windows userland needs. It's an attack vector banned in an enterprise environment and dongle hell for everyone else. USB-C yes, TB no.

    • Avatar

      RobertJasiek

      In reply to TEAMSWITCHER:

      Yes, Surface needs a better attitude:

      • Replaceable batteries at all (instead of throwing away the device to get a possibly refurbished replacement device; it is not rocket science to provide easy access on the back but mobile devices of the 1990s had it), at a reasonable price (ca. €50 instead of the current ca. €500), available for a guaranteed number of years (7 is the minimum for environment) and easy availability (instead of the current impossibility to find out before purchase).
      • Very low reflectance of the display. It is a mobile device and not a PC always hidden from sunlight. It is for constant working and not supposed to hurt the eyes. The technology is available: matte display (with touch, matte has been available as a technology for years), nano-matte display (so you do not even notice the grain) or at the very least reduced mirroring of a glare display (iPads have been doing it for years).


      These two aspects prevent my purchase each time Surface is updated.

  7. Avatar

    remc86007

    I can't wait for new Surface products! I'm hoping there is a Ryzen APU Surface Laptop with 16GB of ram to replace my 1st gen base model Surface Book. The dual core with integrated Intel graphics and 8GB of ram is barely manageable in photo editing (although it is super choppy when plugged into an external 4k display) and it simply cannot do video editing in Resolve.

  8. Avatar

    pk277612

    Thanks for this valuable information


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