Microsoft released its Q4 FY21 and overall FY21 results on Tuesday, July 27 and, as always, there were some interesting (and debatable) points raised in the data provided by Microsoft and the transcript of their call with analysts. Here’s my take on the highlights relating to Office 365, Microsoft 365, and Teams:
Commercial Cloud revenue, which includes Office 365, achieved $19.5 billion in revenue for the quarter ($78 billion annualized run rate) and $69 billion for FY21.
Office 365 commercial (the enterprise services) revenue grew 25% (20% in constant currency due to the weak dollar). Microsoft attributed this success to “installed base expansion” and “higher average revenue per user (ARPU).”
Office 365 paid seats grew 17% year over year. Microsoft started to talk about paid seats in the Q3 FY21 results when they reported 296.7 million paid seats. They don’t give numbers for active users anymore. I reckoned that the number of active users was around 264 million three months ago. Given the normal rate of increase observed over the last six years, the number of active Office 365 users is likely around 280 million now with perhaps 315 million paid seats.
Microsoft 365 E5 is now 8% of the Office 365 commercial base, or around 25 million. Microsoft has had steady success in upselling customers from Office 365 plans to Microsoft 365 plans. The demand for Microsoft 365 E5 probably reflects the need enterprises have for these licenses to access high-end compliance and data governance functionality along with the Enterprise Mobility and Security suite.
Reflecting the steady reduction in on-premises servers, Microsoft said that they expect a 20% revenue reduction in this area for next year.
The big surprise came when Microsoft reported “We have nearly 250 million monthly active users” for Teams. More on that number below. What was interesting is the 80 million Teams users who have Teams Phone licenses and make 1 billion calls per month. Although the imminent retirement (July 31) of Skype for Business Online has quickened the transition to Teams, these are impressive numbers.
Overall, strong growth and progress across Office 365, Microsoft 365, and Teams.
That Teams Number
In April 2021, Microsoft reported that Teams had 145 million daily active users. Three months later, the headline number Microsoft is using for Teams is “nearly” 250 million, nearly 80 million of whom use the Teams Phone system. The jump in numbers over time illustrated by in Figure 1 is quite remarkable, especially as factors like work from home and transition from Skype for Business Online were largely baked into previous data.
Figure 1: Is this sudden growth in Teams user numbers credible?
I have some difficulty reconciling the two numbers. Here’s why:
The April 2021 number reported daily active users. These are people who use the product day-in, day-out. The July number is for monthly active users. You don’t have to do much to qualify as a monthly active user. Opening the Teams client and accessing a channel is enough. Moving to report monthly active users is simply a way to swell the numbers.
Microsoft doesn’t breakdown the Teams numbers across Teams enterprise, Teams for education, and Teams for personal life. Even though a Teams personal client will appear in Windows 11, I doubt it contributes much to the overall number. However, in February 2021, Eran Megiddo, Microsoft CVP for Windows Product and Education claimed that 100 million students used Teams. Putting together the 145 million reported (presumably for enterprise users) in April and 100 million student users, we get close to the 250 million now claimed.
Teams is a huge consumer of SharePoint Online. In December 2020, Jeff Teper said that SharePoint Online has 200 million monthly active users. If Teams has 250 million users now, SharePoint Online must be north of 300 million, and I would expect Microsoft to make a big thing of that achievement.
If Teams has 250 million commercial users, it’s getting close to the point where every Office 365 user is a Teams user. I don’t consider this credible.
The number of large organizations using Teams is a good measure of growth. Table 1 compares the figures given in January and July.
January 2021
July 2021
Organizations with > 100,000 Teams users
117
124
Organizations with more than 10,000 Teams users
2,700
3,000
Table 1: Teams use in large organizations
Doing a simple sum, we compute the numbers of users in these organizations in January to be (117*100K) + (2700*10K) = 38,700,000 and in July (124*100K) + (3000*10K) = 42,440,000. Although growing the large organization bucket by 3.7 million is a fine achievement in two quarters, it doesn’t align with a claim to have increased the overall Teams number by 105 million in a single quarter.
There’s no doubt that Microsoft has a very successful product in Teams. There’s no doubt that the number of Teams users is growing strongly. But when Microsoft obfuscates the information it reports (no doubt for competitive reasons), it doesn’t help anyone when they go too far and don’t explain the basis for the numbers given three months ago and now.
Stay updated with developments across the Microsoft 365 ecosystem by subscribing to the Office 365 for IT Pros eBook. We do the research to make sure that our readers understand the technology.
{"id":null,"mode":"button","open_style":"in_modal","currency_code":"EUR","currency_symbol":"\u20ac","currency_type":"decimal","blank_flag_url":"https:\/\/office365itpros.com\/wp-content\/plugins\/tip-jar-wp\/\/assets\/images\/flags\/blank.gif","flag_sprite_url":"https:\/\/office365itpros.com\/wp-content\/plugins\/tip-jar-wp\/\/assets\/images\/flags\/flags.png","default_amount":100,"top_media_type":"featured_image","featured_image_url":"https:\/\/office365itpros.com\/wp-content\/uploads\/2022\/11\/cover-141x200.jpg","featured_embed":"","header_media":null,"file_download_attachment_data":null,"recurring_options_enabled":true,"recurring_options":{"never":{"selected":true,"after_output":"One time only"},"weekly":{"selected":false,"after_output":"Every week"},"monthly":{"selected":false,"after_output":"Every month"},"yearly":{"selected":false,"after_output":"Every year"}},"strings":{"current_user_email":"","current_user_name":"","link_text":"Virtual Tip Jar","complete_payment_button_error_text":"Check info and try again","payment_verb":"Pay","payment_request_label":"Office 365 for IT Pros","form_has_an_error":"Please check and fix the errors above","general_server_error":"Something isn't working right at the moment. Please try again.","form_title":"Office 365 for IT Pros","form_subtitle":null,"currency_search_text":"Country or Currency here","other_payment_option":"Other payment option","manage_payments_button_text":"Manage your payments","thank_you_message":"Thank you for supporting the work of Office 365 for IT Pros!","payment_confirmation_title":"Office 365 for IT Pros","receipt_title":"Your Receipt","print_receipt":"Print Receipt","email_receipt":"Email Receipt","email_receipt_sending":"Sending receipt...","email_receipt_success":"Email receipt successfully sent","email_receipt_failed":"Email receipt failed to send. Please try again.","receipt_payee":"Paid to","receipt_statement_descriptor":"This will show up on your statement as","receipt_date":"Date","receipt_transaction_id":"Transaction ID","receipt_transaction_amount":"Amount","refund_payer":"Refund from","login":"Log in to manage your payments","manage_payments":"Manage Payments","transactions_title":"Your Transactions","transaction_title":"Transaction Receipt","transaction_period":"Plan Period","arrangements_title":"Your Plans","arrangement_title":"Manage Plan","arrangement_details":"Plan Details","arrangement_id_title":"Plan ID","arrangement_payment_method_title":"Payment Method","arrangement_amount_title":"Plan Amount","arrangement_renewal_title":"Next renewal date","arrangement_action_cancel":"Cancel Plan","arrangement_action_cant_cancel":"Cancelling is currently not available.","arrangement_action_cancel_double":"Are you sure you'd like to cancel?","arrangement_cancelling":"Cancelling Plan...","arrangement_cancelled":"Plan Cancelled","arrangement_failed_to_cancel":"Failed to cancel plan","back_to_plans":"\u2190 Back to Plans","update_payment_method_verb":"Update","sca_auth_description":"Your have a pending renewal payment which requires authorization.","sca_auth_verb":"Authorize renewal payment","sca_authing_verb":"Authorizing payment","sca_authed_verb":"Payment successfully authorized!","sca_auth_failed":"Unable to authorize! Please try again.","login_button_text":"Log in","login_form_has_an_error":"Please check and fix the errors above","uppercase_search":"Search","lowercase_search":"search","uppercase_page":"Page","lowercase_page":"page","uppercase_items":"Items","lowercase_items":"items","uppercase_per":"Per","lowercase_per":"per","uppercase_of":"Of","lowercase_of":"of","back":"Back to plans","zip_code_placeholder":"Zip\/Postal Code","download_file_button_text":"Download File","input_field_instructions":{"tip_amount":{"placeholder_text":"How much would you like to tip?","initial":{"instruction_type":"normal","instruction_message":"How much would you like to tip? Choose any currency."},"empty":{"instruction_type":"error","instruction_message":"How much would you like to tip? Choose any currency."},"invalid_curency":{"instruction_type":"error","instruction_message":"Please choose a valid currency."}},"recurring":{"placeholder_text":"Recurring","initial":{"instruction_type":"normal","instruction_message":"How often would you like to give this?"},"success":{"instruction_type":"success","instruction_message":"How often would you like to give this?"},"empty":{"instruction_type":"error","instruction_message":"How often would you like to give this?"}},"name":{"placeholder_text":"Name on Credit Card","initial":{"instruction_type":"normal","instruction_message":"Enter the name on your card."},"success":{"instruction_type":"success","instruction_message":"Enter the name on your card."},"empty":{"instruction_type":"error","instruction_message":"Please enter the name on your card."}},"privacy_policy":{"terms_title":"Terms and conditions","terms_body":null,"terms_show_text":"View Terms","terms_hide_text":"Hide Terms","initial":{"instruction_type":"normal","instruction_message":"I agree to the terms."},"unchecked":{"instruction_type":"error","instruction_message":"Please agree to the terms."},"checked":{"instruction_type":"success","instruction_message":"I agree to the terms."}},"email":{"placeholder_text":"Your email address","initial":{"instruction_type":"normal","instruction_message":"Enter your email address"},"success":{"instruction_type":"success","instruction_message":"Enter your email address"},"blank":{"instruction_type":"error","instruction_message":"Enter your email address"},"not_an_email_address":{"instruction_type":"error","instruction_message":"Make sure you have entered a valid email address"}},"note_with_tip":{"placeholder_text":"Your note here...","initial":{"instruction_type":"normal","instruction_message":"Attach a note to your tip (optional)"},"empty":{"instruction_type":"normal","instruction_message":"Attach a note to your tip (optional)"},"not_empty_initial":{"instruction_type":"normal","instruction_message":"Attach a note to your tip (optional)"},"saving":{"instruction_type":"normal","instruction_message":"Saving note..."},"success":{"instruction_type":"success","instruction_message":"Note successfully saved!"},"error":{"instruction_type":"error","instruction_message":"Unable to save note note at this time. Please try again."}},"email_for_login_code":{"placeholder_text":"Your email address","initial":{"instruction_type":"normal","instruction_message":"Enter your email to log in."},"success":{"instruction_type":"success","instruction_message":"Enter your email to log in."},"blank":{"instruction_type":"error","instruction_message":"Enter your email to log in."},"empty":{"instruction_type":"error","instruction_message":"Enter your email to log in."}},"login_code":{"initial":{"instruction_type":"normal","instruction_message":"Check your email and enter the login code."},"success":{"instruction_type":"success","instruction_message":"Check your email and enter the login code."},"blank":{"instruction_type":"error","instruction_message":"Check your email and enter the login code."},"empty":{"instruction_type":"error","instruction_message":"Check your email and enter the login code."}},"stripe_all_in_one":{"initial":{"instruction_type":"normal","instruction_message":"Enter your credit card details here."},"empty":{"instruction_type":"error","instruction_message":"Enter your credit card details here."},"success":{"instruction_type":"normal","instruction_message":"Enter your credit card details here."},"invalid_number":{"instruction_type":"error","instruction_message":"The card number is not a valid credit card number."},"invalid_expiry_month":{"instruction_type":"error","instruction_message":"The card's expiration month is invalid."},"invalid_expiry_year":{"instruction_type":"error","instruction_message":"The card's expiration year is invalid."},"invalid_cvc":{"instruction_type":"error","instruction_message":"The card's security code is invalid."},"incorrect_number":{"instruction_type":"error","instruction_message":"The card number is incorrect."},"incomplete_number":{"instruction_type":"error","instruction_message":"The card number is incomplete."},"incomplete_cvc":{"instruction_type":"error","instruction_message":"The card's security code is incomplete."},"incomplete_expiry":{"instruction_type":"error","instruction_message":"The card's expiration date is incomplete."},"incomplete_zip":{"instruction_type":"error","instruction_message":"The card's zip code is incomplete."},"expired_card":{"instruction_type":"error","instruction_message":"The card has expired."},"incorrect_cvc":{"instruction_type":"error","instruction_message":"The card's security code is incorrect."},"incorrect_zip":{"instruction_type":"error","instruction_message":"The card's zip code failed validation."},"invalid_expiry_year_past":{"instruction_type":"error","instruction_message":"The card's expiration year is in the past"},"card_declined":{"instruction_type":"error","instruction_message":"The card was declined."},"missing":{"instruction_type":"error","instruction_message":"There is no card on a customer that is being charged."},"processing_error":{"instruction_type":"error","instruction_message":"An error occurred while processing the card."},"invalid_request_error":{"instruction_type":"error","instruction_message":"Unable to process this payment, please try again or use alternative method."},"invalid_sofort_country":{"instruction_type":"error","instruction_message":"The billing country is not accepted by SOFORT. Please try another country."}}}},"fetched_oembed_html":false}
At some point they will run out of ways to impress stakeholders or will start counting “potential” users, etc. 🙂