Microsoft Corp. MSFT 0.49% continued its re-birth as a force in cloud computing, posting stronger than expected gains in its business of selling web-based services to corporate customers. The software giant has been working to expand the business selling web-based services to corporate customers and now has solidified its spot as the No. 2 provider of on-demand computing processing and storage behind market pioneer Amazon.com Inc. AMZN 0.18% in its fiscal first quarter, Microsoft notched gain its Azure cloud-computing business and office 365, the online version of its widely used productivity software.
The Redmond, Washington Company said Thursday that its intelligent cloud segment, which includes Azure, rose 11% to $7.4 billion. In the productivity and business processes segment, which includes the office franchise revenue climbed 21% to $8.4 billion. Microsoft doesn’t disclose revenue figures for its Azure and office 365 businesses, but it said Azure revenue jumped 97% and Office 365 revenue rose 43%. “Azure was the primary source of our out performance in the quarter”, Microsoft Finance Chief Amy Hood said in an interview. “It’s higher than I was expecting”.
Overall, Microsoft posted $6.51 billion in fourth-quarter net income, or 83cents a share, compared with a profit of $3.12billion, or 39cents a share, a year ago. Excluding the impact of revenue deferrals and other items, adjusted earnings climbed to 98cents from 69cents a year earlier. Per-share earnings in the most recent quarter included a 23cent tax benefit related to Microsoft winding down its mobile phone business.
Revenue rose 13% to $23.23billion and was $24.7 billion when adjusted to reflect windows 10 revenue deferrals. Analysts surveyed by S & P Global market intelligence expected Microsoft to report adjusted per-share earnings of 71cents, a figure that didn’t include the 23cents tax benefit, on $24.29billion in adjusted revenue. Share rose 3.1% to $76.50 in after-hours trading after results beat expectations. The software giant’s shares closed at a record on Thursday, after setting its previous high a day earlier.
Microsoft growth in the so-called hyper scale public cloud market was faster in the quarter than investors anticipate. The cloud unit is still smaller than Amazon in the market but appears to be pulling away from its nearest rival, Alphabet Inc.’s Google, said stifel Nicolaus and Co. analyst Brad Reback. “They are the undisputed no.2 in the hyper scale public cloud market, and it will be extraordinarily difficult for anyone to catch them,” Mr Reback said.