Microsoft Azure revenue growth rate is slowest in years

Microsoft CEO Satya
Nadella
Business
Insider

• Although Microsoft had a solid quarter, Azure’s revenue
  growth is the slowest its been since Microsoft started
  regularly posting Azure’s revenue growth. 
• Revenue growth for Azure was 76%, down from 89% last
  quarter.
• Analysts believe Azure will still continue to be a key
  driver for Microsoft’s business.

Microsoft
dazzled Wall Street by topping revenue and profit expectations in
its 

quarterly
results

 on
Wednesday, but a close look at one notable part of the company’s
business reveals a worrisome trend. 

Azure, the name of Microsoft’s
cloud computing product line, is a central plank in Microsoft’s
mission to reinvent itself as a powerhouse in the new generation
of cloud services. But in the three months ended September 30,
Azure’s revenue growth slowed to its lowest clip in
years. 

Microsoft does not break out the
actual revenue from Azure, but said that Azure’s revenue growth
rate in the first quarter of its fiscal 2019 year was 76%. That’s
pretty good for most businesses, but it represents deceleration
from the 89% growth it chalked up in the previous quarter. 
In fact, it’s the slowest growth since Microsoft began to report
the growth rates in its fiscal 2016. 

And if you look at the past 12
quarters, the slowdown in Azure’s revenue growth is even more
apparent:

Fiscal 2019 Q1: 76%

Fiscal 2018 Q4: 89%

               
        Q3: 93%

               
        Q2: 98%

               
        Q1: 90%

Fiscal 2017 Q4: 97%

               
       Q3: 93%

               
       Q2: 93%

               
       Q1: 116%

Fiscal 2016 Q4: 102%

               
        Q3 120%

               
        Q2: 140%

Azure is one of the most vital
fuels for Microsoft, along with Office. Amazon Web Services is
Microsoft’s
strongest competitor for the Azure product, as both tech
giants are key players in the
cloud wars. Analysts from Wedbush believe there will be
opportunity to convert enterprises to using Azure based on
discussions they’ve had with partners and customers.

Microsoft ascribed the deceleration to the “law of large
numbers.” During the company’s conference call, CFO Amy Hood said
the Azure number on its own was less important than the overall
“hybrid demand,” for Microsoft’s cloud services, which benefit
from its productivity apps and other products.

For now, investors appear willing to take Microsoft’s word for
it. Shares of the company were up 2.4% in after hours trading
following the company’s earnings report on Wednesday. 

Get the latest Microsoft stock price here.