Microsoft's Meteoric Rise in India, FY23 Revenues Soar to Rs 19,229 Crore
TCS and Microsoft Join Forces, Empowering India's AI and Cloud Ecosystem
23 October 2023
Microsoft India achieved substantial revenue growth, with FY23 revenues reaching Rs 19,229 crore, a 39% improvement from the previous year.
The Indian unit's net profit margin of 3.3% was notably lower than its US parent's margin, mainly due to significant royalty payments.
Microsoft's shift towards cloud services and generative AI contributed to its impressive growth in India, where it holds about one-fifth of the cloud services market, second only to Amazon Web Services.
Microsoft, the world's largest software company, has continued its remarkable growth trajectory in India. In FY23, the company recorded revenues of Rs 19,229 crore ($2.3 billion), showcasing a substantial improvement of over 39% from the previous year. This impressive topline growth was in line with the FY22 rate of 47%.
The Arc, a business research platform, conducted an in-depth review of Microsoft's regulatory filings in India, providing insights into the company's performance.
Despite the revenue surge, Microsoft's Indian unit saw a net profit margin of 3.3%, significantly lower than its US parent's margin of 31-36%. The discrepancy in profit margins can be attributed to the substantial royalty payments made by the Indian unit to its US parent. This royalty, accounting for various services and products like Office Suite, cloud services under Azure, and Bing, surged by 52% to Rs 13,139 crore ($1.58 billion) in FY23, comprising 68% of the annual income, up from 63% in the previous financial year.
A significant transformation in Microsoft's revenue mix in India has occurred over the years. The company has shifted from being a seller of licensed and on-premise software services to a cloud-native player. The share of services revenue in the topline increased from 51% in FY20 to 74% in FY23, while the share of revenue from the sale of Microsoft retail products decreased from 49% to 26%.
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A pivotal moment in Microsoft India's journey was the top-level shuffle in September when Puneet Chandok assumed the role of country head. Chandok's previous leadership role at Amazon Web Services added a new dynamic to Microsoft's operations in the country.
The surge in Microsoft's growth in India has been fueled by the increased demand for its cloud platform, Azure, and generative artificial intelligence services. It is estimated that Microsoft holds about one-fifth of India's cloud services market through its Azure platform, closely trailing the market leader, Amazon Web Services (AWS).
In comparison to its global competitors, Microsoft is steadily gaining ground as a cloud service provider. A market report by Bank of America placed Microsoft's global market share at 30%, following AWS's dominant 55% share.
Microsoft's cloud adoption in India has been boosted by partnerships with Indian IT services companies, with its generative AI services poised for growth. In a strategic move, Tata Consultancy Services (TCS) announced a partnership with Microsoft's Azure AI platform to enhance margins in a time of industry-wide weakness.