Office 365 Insights from Microsoft’s FY21 Q2 Results

Office 365 is reported as part of Productivity and Business Processes
Office 365 is reported as part of Productivity and Business Processes

Microsoft reported another good set of results and beat Street estimates for its FY21 Q2 quarter on Tuesday, 26 January (see online details). Looking through the press release, transcript of the analyst call, and slides, some interesting nuggets about Office 365 popped up. In a nutshell:

  • No new number for Office 365 active users. Growth might be slowing.
  • Upsell to more expensive licenses means that revenues are increasing.
  • Teams deployments in large organizations is impressive.
  • Azure AD also got a nice bump in monthly active users.

Office 365

Microsoft has not reported a number for Office 356 active users since October 2019. They now prefer to focus on revenue growth (21% year over year) and report only that Office 365 commercial seats grew 15% year over year.

Microsoft didn’t give a confirmed number for Office 365 active users in January 2020 but using the October 2019 as a base with three months of average growth to January 2020 and a 15% uplift since, we get to a current figure of approximately 240 million active users. In April 2020, Microsoft said that they had 258 million paid Office 365 seats, so there’s quite a gap between paid and used seats, at least based on the data Microsoft chooses to share in public.

Microsoft’s growing reluctance to talk about the number of Office 365 active user might be due to slowing demand. Three factors which might influence slowing demand are:

  • All the easy migrations from on-premises Exchange and SharePoint servers are over. The ones left are harder and slower. Some organizations due to be migrated have already bought licenses, which accounts for some of the difference between paid and active seats.
  • The same is true for migrations from other (and older) platforms. Lots of email seats were migrated from the likes of Lotus Notes in the past. That isn’t so much of a factor now.
  • The Covid-19 pandemic has had a big impact on the small to medium business segment and Microsoft might be seeing some erosion in Office 365 seats in that base.

Microsoft 365

Even if the average growth per month for Office 365 active seats is slowing, Microsoft continues to increase revenue extracted from its base. Commercial cloud amassed $16.7 billion revenue in the quarter (a run rate of $66.8 billion), helped by upsell of expensive E5 licenses to boost the average revenue per user (ARPU). As CFO Amy Hood said: “Results were driven by installed base expansion across all workloads and customer segments, as well as higher ARPU. The strong demand for Microsoft 365 noted earlier, particularly for our security, compliance, and voice components, drove E5 revenue growth acceleration again this quarter.”

Don’t expect Microsoft to stop shipping features which need high-end or add-on licenses like Teams DLP policies (Office 365 E5) and Azure AD Access Reviews (Azure AD Premium P2). Increasing the amount charged each user per month drives profit very nicely.

Teams

Microsoft didn’t give a number for Teams daily active user, but the assumption is that some growth has happened since they reported 115 million in October 2020. Instead, Microsoft concentrated on the number of large organizations using Teams. This is important because it underscores the enterprise credentials of both Microsoft and Teams. The numbers for large organizations using Teams are summarized in Table 1.

 Organizations with over 100,000 Teams UsersOrganizations with over 10,000 Teams Users
July 2020691,800
January 2021117 (+48)2,700 (+900)
Table 1: Growth in large organizations using Teams

Put another way, these 2,817 customers represent approximately 40 million users. The number of Teams users in large enterprises is more than the overall total claimed by its competitors. Microsoft also said that the U.S. Department of Veterans Affairs now has more than 500,000 Teams users and joins Accenture in the half-a-million Teams users club, a landmark reached in July 2020. Accenture’s use of audio conferencing is reported to have passed the billion minutes a month mark, up from the 900 million minutes claimed in December.

The success of Teams overall and in large enterprises in particular adds credence to Microsoft’s recent assertion of 200 million users for SharePoint Online. Teams makes SharePoint easier to use and the growth in SharePoint usage is powered by Teams.

Azure AD

Azure AD now has 425 million daily active users. This isn’t too earth-shattering until you realize that the figure given in Microsoft’s FY21 Q1 results in October was “nearly 400 million active users.” Growing over 25 million monthly active users in a quarter is impressive.


The Office 365 for IT Pros team has been tracking Office 365 numbers and statistics since 2014. The data forms part of our overview of Office 365 and Microsoft 365 in the Office 365 for IT Pros eBook.

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