Microsoft shared its Teams PSTN user numbers during its Q4 earnings call which have nearly doubled in reaching 12 million users.
This figure came to light alongside the news of Microsoft’s Q4 earnings failing to meet investor expectations, which preceded a 1% drop in its share price.
Nevertheless, Microsoft Teams has excelled this quarter, powering revenue, subscription, and seat growth in Microsoft 365.
Satya Nadella, Chairman and CEO of Microsoft, said: “In this economic environment, every organization is looking to support employee flexibility and improve productivity.
“Hybrid work is now just work, and it’s imperative that organizations reconnect and re-engage the work force at home and office and everywhere in between.
“To do this companies need a digital fabric that connects employees as well as customers and partners wherever and whenever they work while reducing cost and complexity. We’re all in on Teams.”
Microsoft has added over 450 capabilities to aid effective collaboration for knowledge and frontline workers, many of which are on Teams. A slew of new Teams features was announced at Microsoft Inspire 2022. A new digital contact centre platform powered by Teams was also unveiled this year at the Microsoft Inspire conference.
One hundred thousand companies, such as Progressive Insurance, Lumen Technologies, and Johnson & Johnson, have created customized line-of-business (LOB) applications in Teams.
LOB and third-party apps have increased their active usage by 40% year-over-year.
More than 60% of Fortune 500 companies are using Teams Rooms to meet their hybrid working needs.
Microsoft Office 365 is again set to drive revenue growth in Office commercial. The number of premium Office 365 seats grew by 14% year-over-year, with E5 growing by 60%, which the Chief Financial Officer of Microsoft, Amy Hood, believes is driven by SMBs and frontline worker offerings.
Commercial licensing was down by around 30%, but Microsoft 365 subscriptions grew by 15%, boosting consumer revenue by approximately 10%.
Microsoft Viva has been a source of high growth for the company, with 25% of Fortune 500 companies now using it. Its customers include Mastercard, AstraZeneca, Commonwealth Bank, and other big names. The success Microsoft Viva is seeing is driving Microsoft 365’s revenue growth.
Earnings Results Across Microsoft
Hood also revealed that Dynamics’ revenue grew by around 20%, driven primarily by Dynamics 365.
LinkedIn’s revenue was also up by roughly 28%. However, this was lower than forecast due to a decrease in advertising expenditure on Marketing Solutions and fewer online job posts negatively impacted Talent Solutions.
Intelligent Cloud’s revenue increased by around 23%. Its FX segment decreased earnings by $309 million, and Azure grew by about 33%, which was one point lower than it had been forecast. Overall, cloud services increased their revenue by roughly 24%.
Revenue for Enterprise Services increased by about 7%, which was lower than expected due to Microsoft Consulting Services’ decline.
Microsoft’s PC segment had lower than expected revenue with around a 4% increase. Nevertheless, Hood points out that there have been share gains, and it is performing above pre-pandemic levels.
It is a similar story for Windows products and cloud services, which increased revenues by around 9%, but it had projected a higher figure.
Gaming revenues decreased by roughly 6%, partly due to a fall in Xbox’s revenue, although this was in line with Microsoft’s forecast.
This quarter, Microsoft made a loss of $47 million, mainly due to a negative investment return. However, returns for investors increased by 19%, which equals $12.4 billion.
Why Microsoft Missed its Targets
Hood explains some of Microsoft’s challenges this quarter: “First, FX. The U.S. dollar strengthened throughout the quarter, creating an additional headwind beyond what we shared mid-quarter.
“As a result, for the full quarter, revenue and EPS were negatively impacted by $595 million and $0.04 per share, beyond our expectations shared in April.
“Next, extended production setdowns in China that continued through May and a deteriorating PC market in June contributed to a negative Windows OEM revenue impact of more than $300 million.
“And finally, reductions in advertising spend impacted LinkedIn Marketing Solutions and search and news advertising revenue by more than $100 million.
“In our consumer business, despite those macro challenges, we drove another quarter of share gains for Windows in the PC market and for Edge in browsers.”
The company is also onboarding 11,000 in Q1, predominantly across LinkedIn, cloud engineering, commercial sales, and customer deployment.
Hood points out, however, that there has been a strong demand for its platform, products, and services, resulting in share gains.
