Microsoft FY23 Q1 Earnings | Hacker News Reader

Microsoft FY23 Q1 Earnings

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60 pointskaycebasques36 comments

Notice how the stock cratered after hours? Growth is slowing on cloud revenue. It's lower than expectations. Cloud is a big reason for the expanded PE ratio on both Amazon and Microsoft. Amazon reports in 2 days, already it's taking a hit. A bit of the assumption is cloud spending would not be as impacted as the Microsoft one is showing. Tech companies in general will likely show red tomorrow, as the markets digest this news.

I’m sure they will be red but MSFT has PE of ~25 which is pretty boring for a “growth” tech stock. AMZN has a PE of >100 and is one of the few remaining outliers among big tech companies. The rest are much closer though not exactly equal to boring blue chip PE ratios.

But cloud is still growing while the stock drops. This tells me that the cloud investment thesis is incorrect, and investors actually care more about PC Windows and Xbox. This makes more sense because cloud compute is destined to become a low-margin commodity, while Windows and Xbox are protected brands.

This quarter Microsoft Cloud revenue was $25.7 billion, up 24% (up 31% in constant currency) year-over-year.

Compared to Google, if I read their Financials correctly, their Cloud revenue was just $6.8 billion for the quarter. https://abc.xyz/investor/static/pdf/2022Q3_alphabet_earnings...

Neither of them are straight forward with what cloud revenue actually means. If I recall correctly, Microsoft includes SQL Server in cloud revenue. The only people on the planet that can tell you Azure's actual revenue work at Microsoft and the only people on the planet that can tell you GCP's actual revenue work at Google.

From the presentation: "Microsoft Cloud includes Azure and other cloud services, Office 365 Commercial, the commercial portion of LinkedIn, Dynamics 365, and other cloud properties."

Specifically, the earnings call slides[1], slide 5/22 footnote.

[1] http://view.officeapps.live.com/op/view.aspx?src=https://c.s...

So they include Office 365 licenses for the Office suite, GitHub and who knows what else.

The "commercial portion of LinkedIn" counts as cloud?

does Github roll up under "other cloud properties"?

Your guess is as good as mine, but I would assume yes for any revenue they generate.

Holy crap.

Looks like Microsoft > Google in Cloud wars. For comparison Google Cloud revenue is just $6B, source: https://news.ycombinator.com/item?id=33338258

Amazon is probably dominating both of them combined...

Maybe not any more: https://www.statista.com/statistics/250520/forecast-of-amazo...

Looks like Azure + Microsoft 365 has overtaken AWS.

The question is whether Azure alone has overtaken AWS…

You can sort of tell by the fact that they didn't announce it had. If Azure was bigger than AWS they would, sure as hell, have announced it.

So it hasn't.

That's probably an accurate deduction.

I generally base my unofficial estimates on the volume of blog posts, google hits, etc... for specific offerings that have direct equivalents in the two clouds.

I still see a significantly smaller volume of hits turning up for Azure, which makes me suspect that they have a higher revenue per resource.

E.g.: I suspect Azure targets "large enterprise", which is notoriously wasteful, whereas AWS targets frugal startups that use Linux and OSS.

> The question is whether Azure alone has overtaken AWS…

Not a very interesting question as the answer is, as it’s been for many years, “no.”

If Azure ever overtakes AWS that will be very noteworthy. But it’s pretty hard to compare revenue to revenue because of the way the companies report.

> This quarter Microsoft Cloud revenue was $25.7 billion, up 24% (up 31% in constant currency) year-over-year.

Literally all those numbers are incorrect. This is what the actual press release says:

> Revenue in Intelligent Cloud was $20.3 billion

Not $25.7B.

> increased 20%

Not 24%.

> (up 26% in constant currency)

Not 31%.

That was a direct quote from the release:

> “This quarter Microsoft Cloud revenue was $25.7 billion, up 24% (up 31% in constant currency) year-over-year. We continue to see healthy demand across our commercial businesses including another quarter of solid bookings as we deliver compelling value for customers,” said Amy Hood, executive vice president and chief financial officer of Microsoft.

From the presentation: "Microsoft Cloud includes Azure and other cloud services, Office 365 Commercial, the commercial portion of LinkedIn, Dynamics 365, and other cloud properties."

No need to be hostile (and right and wrong simultaneously).

Intelligent Cloud is a subset of MS's overall cloud offering (Microsoft Cloud).

Cloud services now bring in more money than Productivity and Business suites. Interesting.

As others have said microsoft leverages their considerable relationships and other products to pump their cloud numbers. My friend who worked for an electric generator told me that microsoft offered to switch the electricity source of their data centers to their company if they switched their cloud to azure. That's on top of the O365 deal and of course massive credits.

Microsoft bundles on-prem enterprise office and exchange licenses into O365, so I think those numbers are misleading.

Yes I think this is correct. For years, MS has made apples-to-apples comparisons with AWS challenging by bundling in cloud app revenue into the overall Azure cloud business. Makes sense bc Office365 SaaS was so much larger than IAAS and PAAS.

O365 and on-prem enterprise suites are under Productivity and Business Processes

https://news.ycombinator.com/item?id=33338742

You only get a good discount on Microsoft Dynamics if you also get some cloud credits ... oh and while getting it: do you want the LinkedIn integration to Dynamics? LinkedIn is accounted for under cloud, too.

They can shift the revenue accountingwise wherever they want it. (Just have to make sure they internally track it better, to see which products actually bring the money ...)

LinkedIn and Dynamics products and cloud services are all under Productivity and Business Processes though.

https://news.ycombinator.com/item?id=33338742

creative accounting tricks will allow anything to be classified as "Cloud" revenue.

So you're saying that Cloud revenue is quite nebulous?

You can't be cirrus.

Please let's not do this on HN.

Or please do. I personally like puns. :)

It's not really about liking them or not. It's about keeping the signal to noise ratio high and leaving the rest to Reddit.

I get your point, but puns are the least of our collective concerns when it comes to signal to noise ratio. Such subthreads are fairly rare considering people trying to jam in (say) partisan politics.

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