Microsoft CEO Satya Nadella: We ‘Outgrew The Market In Every Category’

Microsoft CEO Satya Nadella said that his company is prepared to seize market share and grow despite economic uncertainty over inflation in the U.S. and a potential recession in the near future, promising that the tech giant will grow its slice of the pie in PCs, security, with its collaboration application Teams and in other areas.

“We will invest to take share and build new businesses in categories where we have long-term structural advantage,” Nadella said Tuesday during the Redmond, Wash.-based tech giant’s quarterly earnings call for the fourth fiscal quarter, which ended June 30.

“We are helping organizations digitize their customer experience, service, finance and supply chain functions as we continue to outgrow the market in every category,” he said.

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Nadella On ‘Best-Of-Suite’ Value

Microsoft’s $51.9 billion in revenue for the quarter came in lower than what analysts expected, but optimistic comments about the company’s future sent the stock price up about 7 percent, from $251.90 at Tuesday’s market close to $268.74 at Wednesday’s market close.

“We do have every layer of the tech stack, right?” Nadella said during the question-and-answer section. “Whether it’s infra[structure], data, hybrid work, security, even Power Platform—in each one of these we do have this best-of-suite value, which includes best-of-category products. And that is leading to share gains.”

Phil Walker, CEO of Manhattan Beach, Calif.-based Microsoft partner Network Solutions Provider, told CRN that he is investing in growing his businesses across the Microsoft portfolio.

“We are doubling down on Azure,” Walker said. “We are investing in people, tools and growth in Azure, Windows, security and ERP.”

His company is also investing in Microsoft offerings around the Internet of Things, Walker said.

Reports issued by multiple investment banks following Microsoft’s earnings call were also optimistic on the tech giant’s quarter and future.

A Credit Suisse report Wednesday said that Microsoft’s results show that “businesses are moving forward on multiyear, strategic cloud-first transformation roadmaps and” that “Azure is disproportionately benefiting, as the ‘enterprise cloud,’ from this accelerated shift.”

“Azure to continue to narrow the revenue gap to No. 1 AWS and widen the gap to No. 3 Google Cloud,” according to Credit Suisse. The firm went so far to forecast mid- to high-teens of revenue growth from Microsoft for at least the next five years, with about 25 percent growth in its Intelligent Cloud segment, about 15 percent growth in its productivity and business processes segment and between 2 percent and 5 percent growth in Windows.

“Despite a worsening macroeconomic environment, management remains confident in achieving double-digit revenue and operating income growth in FY2023—with operating margin to be roughly flat,” according to the note.

Morgan Stanley issued a note Tuesday, saying Microsoft’s 35 percent year-over-year growth in commercial bookings “highlights Microsofts strong value proposition and solid secular positioning, while sustained guidance for double-digit operating income growth illustrates a steady hand at the helm.”

Although Microsoft gave “a credible outlook for double-digit revenue growth into FY23.” and Morgan Stanley called the company “a safe haven within software (and realistically the broade market),” its outlook for its current fiscal year could be rosier than expected seeing as “many investors feel the macro backdrop is likely to worsen further,” according to the firm.

The Morgan Stanley note also applauded more than 60 percent growth in E5, a license type usually held by larger customers. E5 should account for 12 percent of the Office 365 commercial installed base, according to the note.

Morgan Stanley did say that deal moderation in the SMB customer base is an area “to monitor,” with the trend expected to continue in the current fiscal year.

On Tuesday, Microsoft CFO Amy Hood said the company continues to deal with some weakness among SMB customers, a possible result of partner program changes in 2022.

Microsoft expects between about $49 billion and $50 billion in revenue in the first quarter of the new fiscal year, according to the tech giant.

Here’s what else Nadella had to say on the earnings call this week.