Demand for cloud services has been on the rise since last year at the onset of the pandemic. As one of the major cloud service providers, Microsoft has perpetually reported revenue increase in its cloud business due to the pandemic-induced shift to the cloud.
This, in part, helped the company post stellar performance for the first quarter of 2021.
Data from Synergy Research Group shows enterprises cut spending on data center hardware to switch for the cloud. In the past year, cloud infrastructure spending grew 35 percent to ~$130 billion compared to ~$89 spent on data center hardware.
In its Jan-March quarter, Microsoft’s revenue rose 19 percent to $41.7bn, the company announced in the recently released financial report. The revenue increase is the highest for the company since 2018.
Operating income rose 31 percent to $17.0 billion.
Rapid Cloud Adoption Continues
Microsoft’s Azure public cloud business grew 50 percent, thanks to the rapid shift to the cloud. In the prior quarter, Azure also grew by 50 percent.
“Over a year into the pandemic, digital adoption curves aren’t slowing down. They’re accelerating, and it’s just the beginning,” Satya Nadella, CEO of Microsoft, said.
“We are building the cloud for the next decade, expanding our addressable market and innovating across every layer of the tech stack to help our customers be resilient and transform.”
Microsoft acquired Nuance, a health care AI company, in a $19.7 billion deal to offer custom-made cloud solutions to healthcare providers. This was a big step that catapults the company’s total addressable market in the healthcare space to nearly $500 billion.
Besides, revenue in its Intelligent Cloud division was also up by 23 percent to $15.1 billion. Other business arms also saw an increase in revenue, including Personal Computing. Personal Computing added $13.0 billion to its balance sheet, a 19 percent increase YoY.
Windows OEM revenue increased by 10 percent, and Surface posted a 12 percent increase in revenue.
Xbox gaming business division posted a 34 percent increase, including sales of next-gen Xbox Series X/S consoles, games, and other related services like Xbox GamePass.
Finally, Productivity and Business Processes division delivered $13.6 billion in revenue, up 15 percent. This division encompasses Office, LinkedIn, and Dynamics products and cloud services.