Microsoft Teams continues to go from strength to strength, with Teams Premium growing to 10,000 paying customers, according to Microsoft’s latest earnings.
Microsoft’s latest financial update, which saw significant revenue and net income growth, highlighted that Teams Rooms has seen nine consecutive quarters of triple-digit growth, while Teams has now reached 320 million monthly active users (MAU). Satya Nadella, Microsoft Chairman and CEO, also underlined the introduction of the new Teams client, “Teams 2.0”, and the improved performance and user experience of the new app.
Nadella said:
When it comes to Teams, usage continues to grow, with more than 320 million monthly active users making Teams the place to work across chat, collaboration, meetings, and calling. This quarter, we introduced a new version of Teams that is up to two times faster while using 50 percent less memory and includes seamless cross-tenant communications and collaboration.”
Microsoft’s Key Findings for Financial Year 2024 Q1
Teams’ ongoing growth is illustrative of a positive start to FY24 with its Q1 earnings.
The tech giant recorded $56.5 billion in revenue and a net income of $22.3 billion during Q1. Revenue grew 13 percent, and net income by 27 percent. Office, server and Microsoft’s cloud services, including Azure, were drivers of revenue growth while devices revenue suffered. Windows sales stabilised.
Microsoft 365 Consumer subscribers increased by 18 percent year over year, rising to 76.7 million. Microsoft also introduced a new $ 1.99-a-month Microsoft 365 Basic subscription in 2023, presumably contributing to the rise in subscribers.
Microsoft’s ongoing migration of organisations to cloud versions of Office is likely also contributing to growth. Office commercial products and cloud services revenue increased by 15 percent year over year, powered by Office 365 Commercial revenue growth of 18 percent. One recent, high-profile example is Amazon reportedly being close to signing a contract worth over $1 billion with Microsoft to bring in one million Microsoft 365 licenses for its corporate and frontline workers.
Microsoft’s intelligent cloud business is also seeing significant growth, generating $24.3 billion in revenue in Q1, a 19 percent year-over-year increase. Azure and other cloud services revenue grew by 29 percent. Nadella said after FY23 Q4 that Microsoft Cloud sales passed $110 billion in the 2023 fiscal year. Azure made up more than 50 percent of that figure for the first time, signalling Azure’s continuing momentum.
Where is Copilot in All of This?
The consumer-centric Windows Copilot launched at the end of September and is “seamlessly available across all the apps and experiences you use most”, as described by Nadella in September, including Office 365, Bing and Windows. It is now available to commercial customers for free.
Business customers have just over a week to wait for 365 Copilot, which launches on November 1 and becomes available for customers on specific business and enterprise plans. Copilot will cost $30 per user per month and will be available for users with Microsoft 365 E3, E5, Business Standard and Business Premium users when it becomes generally available.
As a result, Copilot is not yet being factored into Microsoft’s revenues, but it could be another boon for the company’s finances if sales of 365 Copilot match expectations.
Microsoft has invested heavily in its OpenAI relationship and other AI solutions, and the company at large and Nadella himself have outlined AI as being integral to the future of the tech industry and his business. He even compared the AI boom to the emergence of PCs in the 1980s and the internet in the 1990s when Copilot was given its soft relaunch in September.
“With copilots, we are making the age of AI real for people and businesses everywhere,” added Nadella in his earnings call. “We are rapidly infusing AI across every layer of the tech stack and for every role and business process to drive productivity gains for our customers.”
Whether customers respond as enthusiastically about experiencing 365 Copilot as Microsoft promotes the product remains to be seen, so observing its impact on revenues in future quarterly earnings will be fascinating.
- Five of the Most Intriguing 365 Copilot Use Cases
- Five Takeaways From Satya Nadella’s Copilot Keynote
What is Teams 2.0?
The new Microsoft Teams app is now generally available for Windows and Mac, creating the best client performance yet for users.
Teams 2.0 has complete feature parity for nearly all features, such as call queues, PSTN calling, and contextual search in chats and channels. General availability also added new features and enhancements, including seamless cross-tenant communication and collaboration across multiple tenants and accounts.
In March, Microsoft launched the new Teams app in public preview, which was notable for being twice as fast and showcasing 50 percent less memory usage on Windows than the Teams classic client.
