Microsoft bets on booming cloud revenues despite $3.2-bn Q4 loss

Microsoft Corporation, which reported a fourth quarter FY15 net loss of $3.2 billion, pulled down by its Windows Phone and the acquisition of mobile phone maker Nokia, is pinning hopes on cloud computing to boost its earnings.

The software major reported an 88-per cent growth in commercial cloud revenue to $832 million (up 96 per cent in constant currency) driven by Office 365, Azure and Dynamics CRM Online.

Microsoft Corp wrote down its Nokia phone business and demand fell for its Windows operating system.

The company took a charge of $7.5 billion in the fourth quarter related to the restructuring of its Nokia handset business, which it bought last year.

Microsoft estimates annualised cloud revenue run rate of over $8 billion and is looking at $20 billion in commercial cloud revenue by 2018.

CEO Satya Nadella, who earlier this year said the company would hit the $20-billion mark for its commercial cloud business in its FY2018, said Microsoft remains "on track to achieve our $20 billion commercial cloud ambition in fiscal 2018."

The company reported a 74-per cent year-on-year increase in the number of Office 365 users in commercial space. "Office 365 is now in four out of five Fortune 500 enterprises, and more than 55 per cent of the install base is on premium workloads. It is clear that we have success moving customers to the cloud given half of all enterprise agreement renewals were for Office 365 this quarter," the company said during investor call.

In addition, Microsoft said small and medium businesses offer "one of our best opportunities for new growth in the cloud." "For more than a year now we've seen 50,000 new SMB customers adopt Office 365 every month."

"Last week at our Worldwide Partner Conference, we announced our new Office 365 premium SKU for businesses, E5. Now our customers will get rich new voice functionality in Skype for Business with Cloud PBX and PSTN conferencing, deep analytics with Delve Org Analytics and Power BI Pro, and advanced security features such as Lockbox and Advanced Threat Protection. With E5, we've expanded our market opportunity for Office 365 by more than $50 billion. This new E5 SKU and the launch of Office 2016 will drive one of the biggest new businesses for us," the company added.

In Azure, both revenue and compute usage increased by triple digits year-on-year, the company said. "We're seeing proof that preference for our cloud SaaS services creates a flywheel of growth for our cloud platform services.We tripled our revenue from Azure Premium Services this quarter. And, with Enterprise Mobility Services, we now have more than 17,000 customers."

Microsoft said it also strengthened its enterprise cloud platform by acquiring Revolution Analytics, Datazen, and Bluestripe in this quarter alone.

''In our commercial business we continue to transform the product mix to annuity cloud solutions and now have 75,000 partners transacting in our cloud,'' said Kevin Turner, chief operating officer at Microsoft.

"Our cloud services are accelerating fast and Windows is positioned for renewed growth," Microsoft added.