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Microsoft's Azure cloud business slows amid intense competition

Microsoft's Azure cloud business slows amid intense competition

The business faces intense competition from Amazon.com's AWS and Alphabet's Google

Credit: Dreamstime

Microsoft's Azure cloud business showed slower quarterly growth even as the software maker topped estimates for profit and revenue, indicating that the company may be facing intense competition in its fastest-growing business.

Revenue from Azure increased 59 per cent in the quarter ended 30 September, but came in well below last year's 76 per cent growth.

Since Chief Executive Satya Nadella took over in 2014, Microsoft has been diversifying from its Windows operating system software, and has focused on its cloud services, in which customers move their computing work to data centers managed by Microsoft.

Strength in that business powered Microsoft's market value past US$1 trillion for the first time in April. However, the business faces intense competition from Amazon.com's AWS and Alphabet's Google.

Worldwide spending on cloud infrastructure services increased nearly 38 per cent year-on-year in the calendar second quarter of 2019 to US$26.3 billion, according to data from research firm Canalys. Amazon Web Services (AWS) still dominates the market with a 31.5 per cent share, with Microsoft coming in second with an 18.1 per cent hold over the market.

Microsoft's shares, up 34 per cent for the year, were 0.5 per cent lower in volatile after market trading.

Revenue from the tech giant's personal computing division, its largest by revenue, rose 4 per cent to US$11.13 billion. The unit includes Windows software, Xbox gaming consoles, online search advertising and Surface personal computers.

The software maker's net income rose 21 per cent to US$10.68 billion, or US$1.38 per share, while total revenue rose 14 per cent to US$33.06 billion.

Analysts had expected a profit of US$1.25 per share on revenue of US$32.23 billion, according to IBES data from Refinitiv.

(Reporting by Noor Zainab Hussain in Bengaluru; Editing by Saumyadeb Chakrabarty)


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