Teams Powers Office 365 Growth

258 Million Office 365 Users and 75 Million Teams Users

Microsoft’s results for the third quarter of FY20 (ending March 31, 2020) featured some interesting information (here’s the transcript of the April 29 earnings call).

As has become the norm every six months, Microsoft reported that Office 365 commercial seats had grown to 258 million monthly active users with revenues up 27% in constant currency. The definition for the monthly active user figure for an Office 365 workload is:

The maximum daily users performing an intentional action in the last 28-day period across the desktop client, mobile client, and web client.

Spike in Office 365 Monthly Growth Rate

Office 365 has been growing at between 3.5 and 4 million monthly active users per month for the last few years. Given that rate of increase, we’d expect the number to be in the 220-225 million range from the 200 million reported in October 2019. Microsoft didn’t provide a figure for active users this time and spoke instead about Office 365 reaching 258 million paid seats (CFO Amy Hood said “nearly 258 million” while Nadella said “258 million”; we use the latter). Assuming a paid seat is active (which isn’t always the case), Figure 1 shows the growth in Office 365 users since November 2015.

Growth in Office 365 monthly active users since November 2015
Figure 1: Growth in Office 365 monthly active users since November 2015

Microsoft reported a higher annual revenue per user (ARPU) for Office 365 due to a “strong upsell to E5.” In other words, they are extracting more money every month per Office 365 user because they are selling higher cost plans (Office 365 E5 instead of E3) and add-on licenses like those needed for advanced compliance. This helped Microsoft achieve a gross margin of 67% for the commercial cloud segment.

The Strain of Growth

Growing at nearing three times the usual rate has imposed some strain on the Office 365 infrastructure. Microsoft has added capacity to deal with the extra demand across all workloads and a new datacenter region (Norway) recently began offering Office 365 service. The strain on some workloads is still evident in the service received by end users.

Teams Grows Like a Rocket

The growth in home working due to the Covid-19 pandemic meant that Teams had a great quarter. Last November, Microsoft reported that Teams had 20 million daily active users. Now they’re claiming 75 million, an increase of 33 million since the first notification of growth to 44 million on 19 March.

It would be nice if Microsoft reported similar statistics for Office 365 and Teams, but even though we’re comparing monthly active users and daily active users, it’s logical to assert that the additional 55 million Teams users added since November accounts for a large proportion of the growth in Office 365. Teams doesn’t run in a vacuum and every extra Teams user means more work for Exchange Online, SharePoint Online, OneDrive for Business, Stream, and Azure Active Directory.

Figure 2 shows the growth in Teams daily active users since July 2019.

Figure 2: Growth in Teams daily active users since July 2019

Microsoft also said that 20 organizations now have over 100,000 Teams seats with Accenture leading the pack at over 500,000 seats. The recent increase in the limit for membership of an individual team to 10,000 is especially welcome in large deployments.

In terms of usage, the new Teams number for daily meeting minutes is 4.1 billion, up from the 2.7 billion reported for March 31, 2020. This is an important number because it gives some insight into the way people use Teams to replace on-site meetings and can be used to compare Teams against its competitors, like the two billion minutes of meetings handled daily by Google Meet (data from April 9).

Many of the recent improvements made in Teams like recordings for 1×1 chats, enforcement of a lobby for external meeting participants, and the hands-up feature in meetings are to help tenants run smoother meetings. Further updates like the 3×3 meeting view are also coming.

Cloud Services on a Nice Roll

Overall, Microsoft reported $13.3 billion in revenue for the commercial cloud segment, up 40% in constant currency. That’s an annualized run rate of $53.2 billion (Satya Nadella’s original goal of a $20 billion annualized run rate was met in October 2017). Things have come a long way since.


If you’re a new (or old) Office 365 tenant administrator, you might need some help to keep running things smoothly. Can we suggest a subscription to the Office 365 for IT Pros eBook? Over 1,200 pages of solid, insightful, and sometimes even humorous advice…

28 Replies to “Teams Powers Office 365 Growth”

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.