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Microsoft Intelligent Cloud, including Azure, now its biggest segment

Microsoft Intelligent Cloud, including Azure, now its biggest segment

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Satya Nadella speaking at the 2016 World Economic Forum in Davos, Switzerland.

David A. Grogan | CNBC

The age of Azure is upon us.

For the first time in more than three years, Microsoft’s Intelligent Cloud reporting segment, which includes the Azure public cloud that competes with market leader Amazon Web Services, contributed more revenue to Microsoft overall than the other two segments: Productivity and Business Processes, which contains Office, and More Personal Computing, which includes Windows.

To be sure, the Intelligent Cloud segment contains several products other than Azure, including SQL Server, Windows Server, Visual Studio, System Center, consulting services and support.

Nevertheless, Azure benefits from a secular shift to cloud that has also benefited other companies, including Alibaba, Google, IBM and Oracle.

Azure’s growth remains meaningful at 64% on an annualized basis in the fiscal fourth quarter, although it’s no longer doubling every year, as it was in 2016. Companies that have bought software from Microsoft for years have been starting to adopt Azure. AT&T announced its plan to move workloads to Azure earlier this week.

Windows revenue from device makers was up 9% on an annualized basis in the quarter, even as people move to update to Windows 10.

Meanwhile, more traditional products in the Intelligent Cloud category are experiencing growth. End of support for SQL Server 2008 and Windows Server 2008 led to growth for server products within Intelligent Cloud, the company said.

Microsoft has used the three current reporting segments since the first quarter of the 2016 fiscal year, or the third quarter of 2015. Before that, Microsoft used two main reporting segments: Commercial, and Devices and Consumer.

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