Simply two weeks after its choice as Netflix’s advert gross sales accomplice of selection stunned your complete media and advert tech trade, Microsoft closed out its 2022 fiscal 12 months on Tuesday.
The partnership single-handedly set the stage for Netflix’s earnings report final week.
However a deal that will have dominated the dialogue of just about some other public advert tech firm hardly got here up in Microsoft’s quarterly report in any respect.
(Critically – Microsoft’s Outlook, Bing and Groups companies had been all completely mentioned earlier than Netflix even got here up.)
Microsoft closed the fiscal 12 months with $198 billion in income (18% year-over-year progress), together with $52 billion in income for This autumn, which represents a 12% YOY improve. And it attributes an excellent chunk of this progress to its cloud enterprise.
LinkedIn additionally made a file contribution to Microsoft’s present advert income, with LinkedIn Advertising and marketing Options bringing in $5 billion in annual income for the primary time since its launch in 2005, Microsoft CEO Satya Nadella mentioned on Tuesday’s investor convention name.
What about Netflix?
“Simply two weeks in the past, Netflix selected us as its unique know-how and gross sales accomplice for its first ad-supported subscription providing,” Nadella mentioned midway by means of the earnings convention. “This can be a validation of the differentiated worth we offer to any writer searching for a versatile accomplice prepared to construct and innovate with them.”
Apart from confirming Netflix’s motives for the partnership, Microsoft didn’t go deep into the deal – it had different progress drivers to debate past its fancy, one-off partnership.
Headwinds
Plus, Microsoft’s inventory is in flux, identical to the state of its brand-new relationship with Netflix.
Shares dropped steadily all through the day main as much as Tuesday’s earnings report, then perked up just a few % in after-hours buying and selling.
Regardless of the road cred it scored as Netflix’s new greatest good friend, there are nonetheless headwinds.
Gaming, for one, isn’t doing so sizzling. Microsoft misplaced $259 million in gaming for the quarter, most of which it chalks as much as Xbox. All enterprise income related to Xbox consoles – together with content material and repair monetization – fell 6% for the quarter. (Makes extra sense why gaming had nearly nothing to do with Microsoft’s new relationship with Netflix.)
A part of it’s the character of the OEM beast – Microsoft additionally reported a 2% loss in Home windows PC {hardware}. Total, Microsoft’s market place as an OEM supplier, particularly within the midst of a recession-driven provide chain scarcity, probably contributed to Microsoft’s reported 8% improve in operational prices for the quarter.
Within the clouds
Some in advert tech have speculated that Microsoft efficiently wooed Netflix as a result of it had a watch on an even bigger prize: Netflix’s cloud enterprise is held by Amazon Net Providers.
Microsoft as a complete touts its cloud enterprise as its largest progress driver.
Microsoft Cloud grew 28% 12 months over 12 months to surpass $25 billion in quarterly income for the primary time.
The expansion in Microsoft’s cloud enterprise – which additionally contains different merchandise like Dynamics 365 and Microsoft Workplace – was primarily pushed by Microsoft Azure. The tech big’s best-performing cloud service was up 40% in income this quarter alone, and is “successful file numbers of $100 million- and $1 billion-deals” from organizations, Microsoft CEO Satya Nadella mentioned.
Typically, these organizations are triple-dipping: “Greater than 65% of Fortune 1000 companies use three or extra of our information options,” Nadella added.
Large-name manufacturers and businesses, corresponding to American Airways, Unilever and Common Motors, for instance, have lately began migrating their information storage and IT workflows to Azure.
Microsoft additionally partnered with Oracle simply final week to offer Azure purchasers entry to Oracle information, too. “We’re the one public cloud service with simplified, direct entry to Oracle databases working within the Oracle cloud,” Nadella mentioned.
Microsoft expects Azure to stay its key progress driver – and Netflix, simply one other shopper win.
