Microsoft CEO Nadella: We Are 'A Clear Leader' In Cloud Security And Beating The Competition At AI Services

Microsoft CEO Satya Nadella contends that the software giant is pulling away from competitors in both cloud security and artificial intelligence.

"Microsoft is a clear leader in cloud security" with "advanced" artificial intelligence that sifts through hundreds of billions of data points per month "to identify anomalies, automate detection and help customers respond to cyber threats," Nadella told analysts after the company reported 58 percent growth in commercial cloud sales for its third fiscal quarter ended March 31.

[Related: 7 Things To Know About Microsoft CEO Nadella's 'Intelligent Cloud, Intelligent Edge' Shakeup]

Nadella also pointed to the announcements this month of new Microsoft security services and features—such as tools for automated threat detection and remediation, the Microsoft Secure Score to help organizations measure themselves on their security posture and an open API for connecting with products that use the Microsoft Intelligent Security Graph.

Meanwhile, when it comes to enabling the next generation of AI innovations, Microsoft has "more services than any other cloud provider," Nadella said. He cited services such as the Bot Framework, used for integrating chatbots, which has attracted more than 300,000 developers for a 150-percent increase year-over-year. Additionally, tens of thousands of customers are now using the Azure Machine Learning cloud-based analytics service, Nadella said.

Nadella's claims of dominance in cloud security and artificial intelligence came the same day as its rival AWS posted a 49 percent increase in sales to $5.4 billion – well above the $5.26 billion Wall Street consensus.

Nadella, however, told analysts that overall Microsoft is doing what it takes to capture the "tremendous opportunity" of the "intelligent cloud and intelligent edge era."

"We took significant steps this quarter to put this at the forefront of everything we do—re-aligning our entire engineering organization to accelerate innovation and better serve the needs of customers and partners, " Nadella said.

He was referring to the company's massive executive shake-up, which he disclosed in late March. The moves include the departure of Terry Myerson, a Microsoft veteran who has headed up the Windows division since 2013, along with numerous other changes in the company's executive ranks. The ultimate goal of the changes is to "accelerate our innovation and better serve the needs of our customers and partners long into the future," Nadella wrote in an email to employees in March.

Other recent cloud and edge computing moves by Microsoft have included the unveiling of a security solution for edge/IoT devices (Azure Sphere)—which Nadella called a "first of its kind" solution during the earnings call—and the general availability launch of a serverless container service (Azure Container Instances).

Both moves have received praise from solution providers, who told CRN they expect to generate new opportunities from the Microsoft solutions for meeting evolving customer needs.

Big Growth At Microsoft

Microsoft reported sales for third quarter of fiscal 2018, ended March 31, rose 15.5 percent to $26.82 billion, up from $23.21 billion during the same period a year earlier.

Net income during the quarter jumped to $7.42 billion, or 95 cents per diluted share, up from $5.49 billion, or 70 cents per share. In after hours trading, Microsoft shares were up two percent or $2.23 to $96.49.

The intelligent cloud segment grew the fastest for the Redmond, Wash.-based company in Q3, with revenue climbing to $7.9 billion. That represented a 17.4 percent increase from $6.73 billion during the same quarter of 2017.

Revenue from Azure surged 93 percent. It was the eleventh straight quarter where Azure revenue grew 90 percent or more on a year-over-year basis.

During the earnings call, Nadella reported "strong customer demand" for Azure Stack, Microsoft's hybrid cloud platform. Azure Stack is "unlocking new workload scenarios across hybrid and edge," Nadella said, later adding that Azure Stack enables Microsoft to have "the best cloud platform" for hybrid computing.

The company's productivity and business processes segment grew nearly as quickly as intelligent cloud in the third quarter, with revenue up 16.7 percent to $9.01 billion, from $7.71 billion the year before. Driving the results were 42 percent growth for Office 365 commercial revenue, along with a 65-percent increase in sales for Dynamics 365 and a 37-percent increase in LinkedIn revenue.

Jeffrey Davis, chairman and CEO of St. Louis-based Perficient, No. 57 on the CRN Solution Provider 500, said in an email that Azure, Office 365 and Dynamics 365 "all broke sales nodes in 2017" at Perficient.

"We are expecting double-digit growth this year as well [in those products]," Davis said. "Our teams are leading with the cloud in all discussions, but most importantly with our line-of-business contacts ... Customers are looking to make strategic choices since they know cloud investments will be long term."

Microsoft, Davis added, "has been making a number of smart decisions that have really put them in a unique position around cloud." Microsoft's leaders have "quickly responded to market trends, are constantly adding new features, and have established partnerships to propel their market share," he said.

"Frankly, these decisions have helped transition Microsoft from a desktop company to a full platform company and has secured their future for years to come," Davis said.

Despite a challenging environment in the PC market, Microsoft reported that its personal computing segment revenue expanded by 13 percent during the third quarter, to $9.92 billion, compared to $8.78 billion a year earlier.

Revenue from Surface devices grew 32 percent during the quarter, thanks in part to the weak quarter that the Surface business experienced the year before. Windows OEM revenue saw a 4-percent uptick during the quarter, while gaming revenue grew 18 percent.

During the earnings call, Nadella also addressed Microsoft's recent signing of a tech industry cybersecurity accord—in which the company pledged to pursue strong steps to protect users online—and the recent creation of a committee at Microsoft to ensure that its AI efforts are advanced in an "ethical and responsible" manner. "Microsoft stands for trust, and this will continue to be a differentiating focus for us moving forward," Nadella said.