- Microsoft said supply chain constraints caused by the coronavirus crisis delayed its spending on expanding cloud infrastructure.
- Those delays, plus an unprecendented surge in demand for its services, caused the company to struggle to keep up with demand, Jonathan Neilson, Microsoft’s finance director of investor relations, told Business Insider.
- The pandemic has been a big test for Microsoft’s cloud business as it tries to upend the market-leading Amazon Web Services, which has said it has experienced no outages during the crisis.
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Microsoft blamed supply chain constraints related to the coronavirus crisis for its Azure cloud’s capacity issues, saying those constraints delayed the company from expanding its cloud infrastructure.
Microsoft admitted in a note to customers published last week that its Azure cloud business has struggled to keep up as the demand for its services including its Teams communications app “crossed into unprecedented territory.” In an earnings slide released with Microsoft third-quarter report, the company said it “delayed cloud infrastructure spend due to supply chain constraints.”
Jonathan Neilson, Microsoft’s finance director of investor relations, told Business Insider that the confluence of supply chain constraints and the surge in demand contributed to Microsoft’s cloud capacity issues.
The pandemic has been a big test for Microsoft’s cloud business as it tries to upend the market-leading Amazon Web Services, which has said it has experienced no outages during the crisis.
Microsoft released the information when it reported third-quarter earnings on Wednesday, beating analyst expectations as it reported $35 billion in revenue and $10.8 billion in net income.
Overall, Microsoft said the coronavirus crisis had “minimal net impact” on company revenue.
Cloud usage increased, especially for the Microsoft 365 bundle of cloud applications including Teams, Azure, Windows Virtual Desktop, advanced security solutions, and Power Platform. Meanwhile, Microsoft said there was a slowdown in transactional licensing — which Neilson said are on-time license purchases versus those purchased on a monthly basis via subscriptions to services like Office 365 – and a reduction in LinkedIn advertising spend during the quarter.
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