Microsoft predicts strong FY23 after quarterly cloud revenue jumps 32%

Microsoft’s cloud engine hummed along in its fiscal Q3 2022, propelling the company to 18% revenue growth and an 8% jump in net income. Though they tipped cloud growth to slow a bit in fiscal Q4, executives said the segment is expected to help fuel double-digit growth in overall revenue in fiscal year 2023.

During an earnings call, CEO Satya Nadella touted its cloud performance, noting it is increasingly seeing “larger, more strategic Azure commitments from industry leaders” across a variety of verticals. “The number of $100 million-plus Azure deals more than doubled year over year, and we are seeing consumption growth across every industry, customer segment and geography,” he stated.

CFO Amy Hood added the company achieved “better-than-expected growth in large, long-term Azure contracts against a very strong prior-year comparable.”

All told, overall revenue rose 18% to $49.4 billion, while net income hit $16.7 billion. By segment, Intelligent Cloud sales increased 26% to $19.1 billion, Productivity and Business Processes revenue was up 17% to $15.8 billion and More Personal Computing sales climbed 11% to $14.5 billion. Microsoft Cloud sales specifically were up 32% to $23.4 billion and commercial bookings grew 28%.

Looking ahead, Hood said Microsoft expects to achieve “healthy double-digit revenue and operating income growth” in its fiscal 2023, which will begin at the end of June. Nadella added he is confident in this projection for several reasons, including the “competitiveness of our tech stack” from the infrastructure to the software-as-a-service level, its price leadership and an overall prioritization of digital transformation across industries despite various market pressures from things like inflation.

“I don't hear of businesses looking to their IT budgets or digital transformation projects as the place for cuts. If anything, some of these projects are the way they're going to accelerate their transformation or, for that matter, automation,” he explained. “We just want to keep driving usage, driving share and be competitive.”

Microsoft, which like many companies suspended sales in Russia earlier this year following the country’s invasion of Ukraine, expects only a minimal impact from the move. Hood stated Russia represents less than 1% of Microsoft’s overall revenue, a figure which is expected to decline “significantly.” In fiscal Q4 2022, she said the company is forecasting a roughly $110 million impact on revenue.