Monthly Update #113 for the Office 365 for IT Pros eBook

The Office 365 for IT Pros eBook team is happy to announce the availability of the November 2024 update (#113) for Office 365 for IT Teams (2025 edition). Current subscribers can download the updated files using the link in their receipt or through their Gumroad.com account. More details about how to fetch updates are available in our FAQ.  Details of changes made at the chapter level are available in our change log.

Office 365 for IT Pros (2025 edition) includes the Automating Microsoft 365 with PowerShell eBook. The PowerShell book has also been refreshed and expanded in this update.

Microsoft FY25 Q1 Results

Closing off the November update coincided with Microsoft releasing its FY25 Q1 results. Normally, I publish a post to comment about the parts of the results that relate to Microsoft 365, but Microsoft’s current rush to apply artificial intelligence to everything means that their quarterly results feature less detail about Microsoft 365.

What we learned was that revenues for the Microsoft Cloud reached $38.9 billion (up 22% year-over-year), or an annual run rate of $155.6 billion. These revenues come with a very healthy 71% margin. In terms of seats, Microsoft has stopped talking about Office 365 seats and now discusses Microsoft 365 seats. That’s fine because Microsoft 365 includes Office 365. In any case, Microsoft said that the number of paid seats had increased 8% year-over-year, which puts Office 365 seats at or around 420 million. Most of the new seats come from frontline workers and small businesses, which might indicate that Office 365 is at saturation point within the enterprise.

In a response to analyst questions (see the earnings call transcript), CFO Amy Hood said that the new seats have “a lower RPU point” (lower average revenue per user). However, upgrades to E5 and Copilot help drive the ARPU and Hood said that she expects to see the impact of Copilot engagement in that number (which Microsoft doesn’t share) going forward.

The Impact of Microsoft 365 Copilot

Speaking of Copilot, Microsoft gave no firm numbers about the number of Microsoft 365 Copilot licenses they’ve managed to sell. They gave some meaningless statistics, like the number of people using Copilot doubled quarter over quarter and that 70% of the Fortune 500 use Copilot. With true numbers, this data is useless. They could be true if Copilot seats doubled from 2 to 4 and each Fortune 500 organization was testing with 100 seats (or less). Citing Microsoft 365 Copilot deployments like Vodafone (68,000 seats) and UBS (50,000 seats) is more impressive.

Microsoft said that the annual run rate of their AI business will get to $10 billion in the next quarter. It’s important to say that this number includes business like Azure OpenAI and isn’t interpreted as Copilot revenue.

The Meaningless Teams Data

Another example of meaningless Microsoft assertions is the statement that 75% of Teams enterprise customers use Premium, Phone, or Rooms. In their FY24 Q4 results, Microsoft said that 3 million users had Teams Premium licenses (less than 1% of the 320 million Teams installed base). The claim now being made doesn’t detail the number of seats sold to Teams enterprise customers or a breakdown of how many have Premium, Phone, or Rooms licenses, so it’s impossible to say whether this is an impressive or disappointing statistic.

On to Office 365 for IT Pros Update #114

What we learned from Microsoft’s results is that the number of paid Microsoft 365 seats continues to grow, albeit possibly more slowly in the enterprise segment. Microsoft’s focus on upselling customers to more expensive products and add-ons continues in the pursuit of higher ARPU. Not much has changed in those respects over the last few years. Meanwhile, the attention of the Office 365 for IT Pros team turns to monthly update #114, which we anticipate will be available on December 1, 2024.