Microsoft Q4 2016 Earnings – Key Takeaways

Supplier Scounting ReportMicrosoft finished fiscal year 2016 on a high note, beating Wall Street’s expectations with $22.6B in Q4 revenue.  Commercial cloud was the strong performer, reporting impressive continued growth.

Key Financial Takeaways

  • Unearned revenue grew 8% QoQ, led primarily by the cloud business
  • The annual run rate for commercial cloud has reached $12.1B, well on track to exceed Microsoft’s goal of $20B by 2018
  • Office 365 revenue increased by 59% in the quarter, with 45% more subscribers than a year ago
  • Azure revenue grew by 102% (though Microsoft does not release the actual dollar figures)

What this means for you:

  • Microsoft will continue to push for adoption of cloud products in order to justify the massive capital investments made in the cloud business. Customers can use this as leverage to achieve aggressive discounting on both the cloud and on-premise products.
  • Microsoft’s cloud products will become more profitable as they reach scale, and we also fully expect Microsoft to increase subscription fees downstream. It is pivotal that customers secure price protections for renewal terms in order to ensure future transparency and predictability.
  • Microsoft is creating bundled cloud solutions in which the need for one product drives the adoption of all the bundled products. Customers should be able to achieve compelling pricing for these bundles but should be careful to ensure they are purchasing for actual needs.



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