The Six Five team discusses Microsoft Earnings.
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Transcript:
Daniel Newman: Let’s just talk about what happened with Microsoft.
Patrick Moorhead: Yeah.
Daniel Newman: Microsoft had, I think, maybe its best earnings call ever.
Patrick Moorhead: Particularly in comparison to others in this space.
Daniel Newman: In this space. And when we talk about Google a little bit, we’ll call it a tale of two companies. And I’d call it good and great, but maybe I’m eternally optimistic. But Microsoft did what I have been waiting for some company to do with this earnings call. Now, look, the company actually had good results all the way across the board. It had good Windows numbers, and well, Surface numbers. I mean, for there being this looming recession, this horribly high interest rate, we’ve got inflation absolutely running rampant still, and no idea… And the market’s crashing, but Microsoft’s like, “We’re chilling. We’re good.”
Patrick Moorhead: It’s so ironic.
Daniel Newman: It is. And their cloud number, 28%.
Patrick Moorhead: Exactly.
Daniel Newman: Best of the group again. Now, again, we’ve always got to deal with the fact that the calculations are not the same company by company and what’s included in cloud. So it’s very hard to actually compare these, but beating the estimate is what matters to the Street. But Pat, the ability to break out the AI number is what I’ve been dying for some companies to do, and that’s what they did well this quarter. They were able to basically say, “We expected 2% incremental growth on Azure because of AI,” and guess what number they got? 3%.
Patrick Moorhead: 3%, yeah.
Daniel Newman: They got 3%, and the market loved it. On top of that ability to talk about Azure, they’re now able to show a monetizing strategy, $30 per user for Copilot. They’ve sold out the demo or whatever you want to call it, the beta to big enterprises that were paying good dollars to have this test. And let’s face it, Pat, $30 a month, basically what you’re saying on an average-wage knowledge worker, if you can get one hour of additional productivity, it’s a good return on investment. They’ve absolutely cornered the market in terms of being able to explain the value of AI in terms of growth in the company. And I want to congratulate Satya. I honestly could go down the list, but Pat, that was it. That’s why they did so well.
Patrick Moorhead: Yeah, two things stuck out for me in addition to what you talked about. That was a good analysis, Dan. A, the citations of gaining market share and, B, giving a drill-down on the number of customers that they have in AI. And I’m going to look at my notes here, but Azure continues to take share. 18,000 organizations are using Azure Open AI. AzureR customers grew, there we go, 21,000, up 140%. More than 16,000 customers using Microsoft Fabric. And this is the transportable data layer that they use between the hybrid multi-cloud.
Daniel Newman: Does it connect the back to the front?
Patrick Moorhead: It should, but you have to architect it that way. If not, just go with Dynamics 365. So, over 1 million paid GitHub Copilot users. That is crazy. 37,000 organizations. 126,000 organizations on Power Platform to date. There’s 170,000 Copilot users on Power Platform. I mean, talk about the double click here, Dan. It was crazy. Sales Copilot, 15,000 organizations. Dynamics 365 took share for the 10th consecutive quarter. I asked the company who they took it from. No comment. We don’t track the beans, but I’m sure we could go back and check out the financials and figure out which ones it is.
Daniel Newman: We’ll know soon enough.
Patrick Moorhead: Yeah. Modern Work, 40% of the Fortune 100 are using Copilot in the early-access program, and we’re going to see it go GA in the middle of November. Super exciting. You commented on Windows. We’re seeing some stability in there, and we saw that not only in Windows but also inside of Security. Another quarter for Security. They continue to gain share across all major categories that they serve. But hey, folks, you get the idea of what’s going on at Microsoft. It is up and to the right. And while I can never call a quarter perfect, this was pretty darn close.
Daniel Newman: About as close as you can get.
Patrick Moorhead: Particularly when you look at some of how the other folks showed up. I’m going to end with essentially the deal goes through. Microsoft-
Daniel Newman: Activision.
Patrick Moorhead: … Activision, but I almost called them EA. Oopsies. Activision is going to go in, but we’re going to start seeing that and those financials hit the P&L soon as well.
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
