Microsoft Intelligent Cloud revenue up 26%, but some pressure due to cloud, AI and GitHub investment

Today, Microsoft announced their FY19 Q3 earnings results. The revenue was $30.6 billion and the operating income was $10.3 billion. Revenue in Intelligent Cloud was $9.7 billion and it increased 22%, with the following business highlights:

Microsoft reported that Server products and cloud services revenue increased 27% driven by Azure revenue growth of 73%. Enterprise services revenue increased 4%.

It is notable that Microsoft’s gross margin decreased slightly due to an increased mix of cloud offerings, offset by improvements in Azure gross margins. Operating expenses grew 22% YoY, driven by investment in cloud and AI engineering, Github and commercial sales capacity.

“Leading organizations of every size in every industry trust the Microsoft cloud. We are accelerating our innovation across the cloud and edge so our customers can build the digital capability increasingly required to compete and grow,” said Satya Nadella, CEO of Microsoft.

“Demand for our cloud offerings drove commercial cloud revenue to $9.6 billion this quarter, up 41% year-over-year,” said Amy Hood, executive vice president and chief financial officer of Microsoft. “We continue to drive growth in revenue and operating income with consistent execution from our sales teams and partners and targeted strategic investments.”