Microsoft Corporation's Nadella Era Is Off to a Promising Start

As Microsoft pivots under new CEO Satya Nadella toward an emphasis on mobile, cloud, and services, it's a good time to check in on management's latest thoughts and commentary to see how the software giant is doing. After all, Nadella has been at the helm of Microsoft for well over a year now, so a close look at the company's most recent earnings call should display evidence of the CEOs early efforts at implementing his new strategies.

In a quest to better understand how well Microsoft is performing amid this important transition, here are a handful of new and insightful quotes from management during the company's first fiscal quarter earnings call last week.

Office Mobile. Image source: Microsoft.

Office 365 is a boonNadella has been a huge proponent of Office 365 since he took over. Indeed, one his first moves after he was appointed CEO was to bring the Office productivity suite to iPad via Office 365. Of course, he has good reason to count it among the company's strengths: The product is one of its biggest contributors to Microsoft's bottom line. Even more, a transition from one-time sales of Office to a cloud-based subscription service is proving to resonate with customers as the company taps ino two undeniable trends: multidevice use and mobile adoption.

"More and more consumers are using Office across device platforms, which is driving Office 365 growth," Nadella said during the call.

Customers are turning on to Office 365 rapidly, with incredible adoption rates.

Microsoft 365 subscribers reached 18.2 million during Q1, up about 3 million from the prior quarter. And the company has surpassed 200 million downloads of Office Mobile.

The cloud is keyReflecting Microsoft's continued emphasis on the cloud, the word "cloud" was used nearly 70 times in the company's most recent earnings report. And Nadella took the time to specifically emphasize why the company is heading in this direction.

Office 365 is driving cloud adoption of Microsoft customers. Image source: Microsoft.

"As customers move to our cloud, it enables us to deliver even more value and push for new growth by entering new categories," Nadella said.

He went on to cite examples of add-on services for cloud clients, including information protection and organization analytics.

Looking ahead, the company wants to grow its commercial cloud revenue to record levels. Microsoft reached an annualized commercial cloud revenue run rate of $8.2 billion during the quarter and is aiming to eventually achieve $20 billion.

It's about servicesPerhaps just as critical to the cloud in Nadella's strategy for Microsoft is services. Consider some of these quotes on services from the call:

  • "Enterprise Mobility services has more than doubled to 20,000-plus customers."
  • "In the last quarter alone, we have made major updates spanning Azure app services."
  • "Windows 10 is also driving increased usage of other Microsoft services."
  • "Our commercial business continues to be healthy, with momentum in cloud services and a higher annuity mix across all segments."
  • "Xbox Live continues to grow active usage and every day nearly half of the Xbox One user base is engaged in the service."

Xbox Live Community. Image source: Microsoft.

Colleague Evan Niu eloquently summed up Microsoft's obvious efforts to drive more services:

An emphasis on services is likely a win for investors. A transition to cloud-based services will drive scale, annuity revenue, and loyalty.

So far, the Nadella era at Microsoft is off to a promising start.

The article Microsoft Corporation's Nadella Era Is Off to a Promising Start originally appeared on

Daniel Sparks has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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