Azure's Rapid Growth & Enterprise Expansion

Not only is Microsoft Azure now the fastest-growing hyperscaler with 31% acceleration in Q3, but its cloud commits 📈 surged $7.5Bn too (~7%) in just one quarter. Satya Nadella highlighted "an acceleration of revenue from migrations to Azure". Let's take a look.

📊 How significant is it to see simultaneous growth in revenue and revenue backlog?

Well, another rapidly growing hyperscaler is Google Cloud. It too experienced robust growth at 28% last quarter, yet its revenue backlog slightly declined by $1.6 Bn (2%).

While such fluctuations are natural, this illustrates that it's really hard to rapidly grow both revenue and the backlog at the same time.

Microsoft Azure commits are now at $117.5 Bn (~50% of $235Bn commits, "related to the commercial portion of revenue". Calculations in my previous posts.)

⚡ >65% of the Fortune 500 now use Azure OpenAI service

Nadella underscored that "the number of Azure AI customers continues to grow and average spend continues to increase", as the majority of Fortune 500 are now using Azure Open AI, driving the revenue up.

"AI services contributed 7 points" of the 31% of Azure growth that exceeded expectations, according to Amy Hood, CFO. She also noted that this AI-driven uplift met their predictions.

💰 ~ 2X acceleration of multi-million-dollar Azure deals

Nadella highlighted that overall Microsoft is "seeing an acceleration in the number of large Azure deals from leaders across industries, including billion-dollar-plus, multi-year commitments...

The number of $100 million-plus Azure deals increased over 80% year over year, while the number of $10 million-plus deals more than doubled" - he added, showcasing rapid growth.

✳️ How will Microsoft's partnerships evolve with Co-Pilot as Orchestrator?

Nadella emphasized the significance of Microsoft Copilot's integration, which is designed not just as a tool but as an orchestrator capable of integrating with a variety of business applications such as ServiceNow, SAP, and Salesforce.

This integration blends the work within knowledge worker tools like email, Teams, Excel, PowerPoint, and Word with the workflow and business process data.

This approach underlines the strategic alignment of Microsoft’s tools with its partner ecosystem, creating a more interconnected business environment.

Nadella emphasized: “Copilot Studio is really off to the races …because one of the things in the enterprise, if you want to ground your copilot with enterprise data, which is in all of these SaaS applications, and Copilot Studio is the tool to use...

we are building a Copilot, which also happens to be an orchestrator of all in other copilots, which to us appear as extensions.”

💡 Does this mean that Microsoft will prioritize its partner ecosystem even more?

Probably, given the strength of AI pull on its growth. What do you think?

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