Azure and Office 365 Shine for Microsoft

Microsoft reported a 3% increase in revenue on a constant currency basis for the quarter ending December 31 to 25.7 billion US dollars. Its Intelligent Cloud division, which sells the Azure proposition, and its Productivity and Business Processes division, which is responsible for Office 365, led the growth. The More Personal Computing division struggled, dragged down by declining Windows Phone sales and declining revenues from Windows itself.

However, Microsoft did report a 30% increase in Xbox Live users to 48 million, together with "strong growth" in Xbox Live transactional revenue. Source: Microsoft presentation

BT Leans Heavily on Consumer Growth

BT Group expects its underlying revenue to be broadly flat in the year ending March 31, 2018. For the quarter ending December 31, 2016, BT reported that underlying revenue fell 1.5% to 6.13 billion UK pounds (7.69 billion US dollars). That figure was dragged down by a 7% decline in revenue in BT Global Services, which is under investigation in Italy.

In the UK consumer market, BT reported a 4% year-on-year rise in revenues thanks to 83,000 broadband net adds and 52,000 TV net adds. BT said its "consumer 12-month rolling ARPU" increased 8% to 39.4 pounds per month driven by broadband, BT Sport and BT Mobile. EE, the newly-acquired mobile operation, increased revenues by 2%. source: BT statement

Alphabet Flags AI-First Future

Alphabet, which owns Google, reported a 24% year-on-year increase in revenues for the fourth quarter to 26.1 billion US dollars on a constant currency basis. The company said advertising revenue growth was driven by "mobile search with ongoing strength in YouTube and programmatic. We also had substantial growth in other revenues from hardware, Play and Cloud."

Sundar Pichai, CEO of Alphabet, added: "Computing is moving from a mobile-first to AI-first with more universal ambient and intelligent computing that you can interact with naturally, all made smarter by the progress we are making with machine learning. 2016 was the year that this became central to who we are as a company and the products that we built. We had more than 350 launches powered by machine learning across areas like search, maps, messaging and Google Play.

"You've heard lots of these examples; easier e-mail replies and inbox, better YouTube recommendations, the incredible cameras on our Pixel phones, and smarter bidding for advertisers in AdWords.

"This quarter, using neural machine translation, we have improved our translation ability more in one single leap than all our improvements over the last 10 years combined. We'll be rolling neural machine translation out across to more than 100 languages available in Google Translate in 2017 and also for all of our Cloud customers through the Google Cloud Translation API." source: Alphabet transcript

For more on the evolution of artificial intelligence, please see my recent report on deep learning for STL Partners.

AT&T Forecasts Low Growth in 2017

AT&T forecast its revenues will grow in "the low-single digits" in 2017 following acquisition-fuelled growth of 11.6% in 2016 to 163.8 billion US dollars. In the fourth quarter of 2016, AT&T Mobility revenue fell about 0.5% year-on-year to 18.8 billion dollars, while the entertainment group lifted revenues 1.6% to 13.2 billion dollars. Business solutions revenues fell 1% to 18 billion dollars, while international revenues (mainly Mexico) rose 3.2% to 1.9 billion dollars.

“2016 was a transformational year for AT&T, one in which we made tremendous progress toward our goal of becoming the global leader in telecom, media and technology,” said Randall Stephenson, AT&T Chairman and CEO. “We launched DirectTV Now, our innovative over-the-top streaming service. Our 5G evolution plans and improved spectrum position are paving the way for the next-generation of super-fast mobile and fixed networks. And we shook-up the industry with our landscape-changing deal to acquire Time Warner, the logical next step in our strategy to bring together world-class content with best-in-class distribution which will drive innovation and more choice for consumers." source: AT&T statements

Verizon's Core Business Under Pressure

Verizon reported a 2.4% decline in revenue for 2016 on a like-for-like basis to 126 billion US dollars, as wireless revenue fell 2.7%. In the fourth quarter, reported revenue was down 5.6% to 32.3 billion dollars.

But Verizon talked up its new media and Internet of Things businesses. "In the fourth quarter, our digital media business, led by AOL, generated revenue of 532 million dollars net of traffic acquisition costs," said Matt Ellis, CFO of Verizon. "This revenue is down about 5% year over year as expected, due to the revenue lift related to the Microsoft deal in the fourth quarter of 2015, but increased around 10% sequentially, in line with expectations. Organically, Internet of Things revenue was 243 million dollars, up 21% in the fourth quarter. We expect to sustain these strong trends. Including acquisitions, Internet of Things revenue increased more than 60% in the fourth quarter." source: Verizon statements

Netflix Forecasts Further Strong Growth.

Netflix reported a 35% increase in global streaming revenue in 2016 to 8.3 billion US dollars. It finished the year with 93.8 million members, having added 19 million in 2016 compared with 17.4 million in 2015.

Netflix forecast a 39% rise in streaming revenues to 2.52 billion dollars in the current quarter, together with net member additions of 5.2 million. In the fourth quarter of 2016, streaming revenues rose 41%.

Reed Hastings, CEO of Netflix, said: "We continue to invest in local programming to complement our content offering and as a means to introduce new members to our global library. We are focusing on local content that travels pan-regionally or across multiple territories, such as Japanese anime and Turkish dramas."  source: Netflix statement

Apple's App Store Enjoys Bumper 2016

Apple said developers earned more than 20 billion US dollars from its App Store in 2016, up over 40% from 2015. Since the App Store launched in 2008, developers have earned more than 60 billion dollars, Apple added.

On New Year’s Day 2017, the App Store sold nearly 240 million dollars worth of apps and content. Apple also reported that the App Store’s subscription billings rose 74% in 2016 to 2.7 billion dollars. source: Apple statement