ERP News

Microsoft’s Productivity Segment and AWS Share a Common Characteristic

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Microsoft Corp. (MSFT) has been on a steady march towards revenue growth as the company has smartly turned its focus toward multiple product lines and cloud, while slowly pushing Windows to the back burner. The technology giant has created a solid portfolio of products that it sells using the as-a-service cloud-delivered model.

The company’s push into the enterprise software segment is built around Office 365, which is part of the Productivity and Business Processes segment. Although we do not exactly know how much its IaaS offering Azure brings in, recent estimates suggest it could be around $2.7 billion dollars in 2016. If that assumption is true, then a large bulk of its cloud revenue is coming from SaaS products because the annualized commercial cloud run rate crossed $14 billion during the most recent quarter.

Considering the rate at which Office 365 has been growing, it is not really a surprise that the SaaS lineup is bringing in revenues in the billions. Office 365 commercial revenue has been growing above 50% for the past several quarters, with the latest quarter growth coming in at 47%. Dynamics 365, Microsoft’s product to address the growing ERP and CRM segment, also witnessed 9% revenue growth during the second quarter.

Revenue from Productivity and Business Processes grew 10% during the second quarter to reach $7.4 billion. More than the revenue growth rate, Microsoft’s management must be extremely happy with the margin levels offered by the productivity segment. During the second quarter, the segment reported an operating income of $3.256 billion with an eye-popping margin of 44.10%, while the margin for the first two quarters was 45.41%.

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