Microsoft’s Nadella: Public Cloud Will Be ‘The Big Winner’ In Down Economy

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Wade Tyler Millward

“The big winner in all of this will be public cloud because the public cloud helps businesses offset demand risk,” Microsoft CEO Satya Nadella said.

Cloud vendors have finally acknowledged that a slowing economy has hurt their profits, but Microsoft CEO Satya Nadella sees a weaker global economy as the chance to prove the need for public cloud.

Public clouds allow Microsoft customers to control ramps up and down based on demand, which could also help customers with growing energy costs, Nadella said during Microsoft’s latest quarterly earnings call.

“The thing, though, from a customer perspective – the best way to align costs with uncertain demand is to move to the cloud,” Nadella said. “So we see the value of the cloud prop. So the big winner in all of this is going to be public cloud because public cloud helps businesses offset demand risk.”

[RELATED: Microsoft Reports PC Trouble, Cloud Growth, SMB ‘Deal Moderation’]

How is Microsoft doing?

While Microsoft Chief Financial Officer Amy Hood handled much of the bad financial news during the company’s earnings report for the company’s first quarter of fiscal 2023 — a quarter that ended Sept. 30 — Nadella still had plenty of metrics to show the company’s growth and established with new products.

Azure Arc has more than 8,500 customers, more than double from a year ago, Nadella said. Azure Machine Learning revenue has increased more than 100 percent for four quarters in a row. And GitHub is at $1 billion in annual recurring revenue and more than 90 billion people using the service.

At least three investment banks report confidence in Microsoft’s long-term capabilities.

“Our thesis remains that the cloud and the underlying Office 365/Windows ecosystem will comprise a larger and larger piece of Redmond going forward and will ultimately drive growth and margins (and the multiple) in FY23/FY24 despite the downturn this,” Wedbush wrote. in a report Wednesday. “We believe the shift to the cloud is still less than 50% penetration and represents a massive opportunity for Nadella & Co. going forward.”

He continued: “Our conversations with customers and partners show our confidence that MSFT can weather this economic storm and ultimately be in a stronger position on the other side with cost reductions and strategic measures already in place.”

A report Wednesday by investment bank KeyBanc said that “despite cyclical headwinds in Azure and Windows/PCs, we remain long-term bullish on MSFT’s hyperscale cloud and integrated infrastructure stack, application development platform, and expanding portfolio of business applications.”

A report from Credit Suisse said that although a slowdown in the consumption of small and medium businesses and the wind towards Microsoft’s Enterprise Mobility + Security business.

“Will likely continue to weigh on early-term growth, we view the negative impact of the currently elevated optimization cycle as more temporary. Similar to past optimization cycles that weighed on growth for ~1-2 quarters, an increase in new charges work followed that brought growth back toward more normalized trends.”

Here’s more of what Nadella had to say during Microsoft’s recent earnings call.

    Learn about Wade Tyler Millward

Wade Tyler Millward

Wade Tyler Millward is an associate editor covering cloud computing and channel partner programs from Microsoft, IBM, Red Hat, Oracle, Salesforce, Citrix and other cloud vendors. He can be reached at [email protected]


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