Microsoft gets a boost from the cloud, beats profit forecast

Lena Tucker
October 27, 2017

According to the earnings report, Microsoft saw an increase of 28 percent in revenue from productivity and business processes with $8.2 billion.

More than three years ago, Microsoft promised to reach an annualized revenue of $20 billion in its corporate cloud business by the end of its 2018 fiscal year (ending in June 2018). "Our results reflect accelerating innovation and increased usage and engagement across our businesses as customers continue to choose Microsoft to help them transform".

Shares rose 2.6% to $80.74 in after-hours trading after results beat expectations. A weaker point in the quarter was gaming revenue, which slipped 1%, ahead of the launch of the Xbox One X on Nov.7.

Revenue was $24.5 billion and increased 12%. The company had guided for between $23 billion and $23.7 billion, and in the year-ago quarter. Windows commercial products and cloud services up 6% due to annuity revenue growth.

As you can see from the image above, the biggest areas of growth, in terms of percentage, are Azure, Dynamics 365, and Office 365 commercial. For the company's Intelligent Cloud division, which includes Azure and Windows Server, revenue increased 14 percent to $6.9 billion, with Azure growth of 90 percent.

MPC (more personal computing) segment derives the majority of its revenues from the PC (personal computing) market. Operating expenses were $8.6 billion, an increase of 16% (15% in CC) over a year ago. The 12% increase (11% in CC) can be attributed to sales of the Surface Laptop.

Gaming revenue increased by 1% (0% in CC), because strength in Xbox software and services - which grew by 21% (20% in CC) offset hardware sales.

That said, cloud revenue continues to dominate Microsoft's earnings, raking in nearly $20 billion this past quarter. The company also said that Azure premium services grew by "triple digits" for the 13th consecutive quarter.

Looking at Microsoft's past year, the company pushed heavily on its cloud business, including Microsoft Azure - which saw a revenue rise of 97 percent year-over-year last quarter.

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