+ Continued momentum in cloud business Azure. In 1Q23, Azure and other cloud services revenue grew 42% YoY in constant currency slightly below the company’s guidance of 43%. The growth was mainly due to strong renewal execution and surge in the number of large and long-term Azure contracts driven by continued demand for cloud computing services.
+ Demand for Office 365 remains strong. Office 365 commercial revenue grew 17% YoY in constant currency driven by paid user growth of 14% YoY. The subscriber growth was mainly due to strong momentum in small and medium businesses and frontline worker offerings. Additionally, average revenue per user (ARPU) continued to increase due to the strong adoption of the E5 license. Upsell to this higher tier was largely due to robust demand for advanced security and Teams voice capabilities in Office 365.
– Slowdown in the PC market hurt Windows. Windows OEM revenue, which includes the sales of Windows software to PC makers, declined by 15% YoY. This is mainly due to a slump in the sales of PCs and deteriorating demand as the spike in inflation forced customers to pull back on spending.