Microsoft earnings notes, Q2 2020: Dynamics, Azure offerings continue expanding to capture customer demand

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Microsoft impressed the markets once again with its second quarter 2020 earnings, which outperformed consensus estimates and demonstrated a sustained ability to grow commercial cloud revenue while holding off an imminent slowing of Azure gross margins.

Beyond the numbers, the earnings call (transcript here) with financial analysts on Wednesday offered more from Hood and CEO Satya Nadella on their optimism over the prospects for both Azure and the business applications opportunity.

When asked about the state of the Dynamics business by an analyst, here was Nadella’s view:

[T]here’s no such thing as a canonical business, and no such thing as a canonical business over time, right? Business processes change. The question is how rapidly can people and domain experts keep up with the change. And that’s where Dynamics 365 absolutely shines. So, we’re excited about what’s happening there.

To your mentioned point about [AI solutions as a sidecar], we think that’s a very legitimate use case. There is a new category, in fact, and a new race starting with CDP, and we’re leading. And so, I feel excited about that, as well.

Earlier in the call, Nadella had already noted Microsoft’s entry into the customer data platform (CDP) space. It’s a business apps niche in which he has personally been visible since the public introduction of the Dynamics 365 Customer Insights product, which runs on Azure Synapse. If CDP is truly a race, then the company’s substantial efforts over the last year to build awareness for the strengths of Customer Insights and its sibling, Dynamics 365 Product Insights, are likely to continue. Hype over CDPs in general could balance out against guidance from skeptics and, at least in the Microsoft space, the challenge of building interest in CDP while so many other potential cloud investments beckon.

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