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Teams Number of Users Keeps On Growing, Like the Rest of the Microsoft Cloud
On October 24, 2023 Microsoft reported their FY24 Q1 results. As usual, there was an upward bounce for Microsoft Cloud revenues to $31.8 billion (annualized run rate of $127.2 billion – Figure 1), an increase from $30.3 billion reported in the last quarter.
Some of the growth comes in an increase in overall user numbers, some comes from Microsoft’s success in extracting additional revenue from existing customers. As CFO Amy Hood noted, “Office Commercial, revenue growth will again be driven by Office 365 with seat growth across customer segments and ARPU growth thru E5.” ARPU is average revenue per customer and it increases when customers upgrade their basic licenses (for instance, from Office 365 E3 to Microsoft 365 E3) or buy add-ons.
Microsoft also highlighted some numbers that they want people to focus in on. For example, Satya Nadella was keen to talk about Microsoft 365 Copilot, noting that customers say that they “can’t imagine work without it.” This might be the case for the test users in the 40% of the Fortune 100 that Microsoft say are in the Copilot preview (including Visa, KPMG, Bayer, Suncorp, and the Mayo Clinic), but it remains to be seen how many will stump up the $30/month price for a Microsoft 365 Copilot license (plus the potential cost of upgrading to an eligible Microsoft 365 license) when it becomes generally available on November 1.
$30 seems like a high monthly charge, but if the Wall Street Journal is correct that Microsoft is losing money on GitHub Copilot because of the operational costs of AI-powered recommendations, then maybe the price of Microsoft 365 Copilot is reasonable.
Teams Keeps Growing
Microsoft certainly hopes that Copilot will be a hit, just like they hoped that Teams Premium will convince customers to upgrade from Teams standard. Microsoft said that 10,000 “paid” customers use Teams Premium. Last quarter, Microsoft said that there were 600,000 Teams Premium users, so it could be that they’re simply reporting numbers a different way and that each customer has 60 Teams Premium users. But I’m sure that this isn’t the case.
Last April, Microsoft reported that Teams had 300 million monthly active users. This time round, they increased the number by 20 million to 320 million (Figure 2).
320 million is a big number and it means that Teams is now used by roughly 80% of the entire Office 365 base. Microsoft said that the number of Office 365 commercial seats grew 10% year over year, which puts it at around 400 million. The 80 million who don’t use Teams must use Slack or something else, or perhaps the different user counts don’t quite match up.
Either way, Teams exerts enormous influence over Microsoft 365 with apps like OneDrive for Business and SharePoint Online experiencing huge growth in usage because of how Teams consumes their services.
EMS Grows By Three Million
The EM+S people succeeded in getting another mention for their progress. In FY23 Q4, Microsoft said “the enterprise mobility and security installed base grew 11% to over 256 million seats.” This time round, they said “the enterprise mobility and security installed base grew 11% to over 259 million seats.” The three million extra seats in a quarter definitely made a difference. Oddly, the current version of the earnings transcript available online makes no mention of EM+S, so maybe I was dreaming…
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