Microsoft exceeds sales, profit estimates on cloud gains

SEATTLE • Microsoft Corp.’s second-quarter sales and profit exceeded analysts’ projections, bolstered by rising customer sign-ups for Azure and Office cloud-computing services.

Profit excluding certain items, such as a few weeks of results from newly acquired LinkedIn, was US84 cents a share on adjusted sales of US$25.8 billion, the software maker said Thursday in a statement. Analysts on average had estimated profit would be US79 cents on revenue of US$25.3 billion in the period ended Dec. 31, according to data compiled by Bloomberg.

Chief executive Satya Nadella is reformulating the company as a seller of Internet-based corporate services for running applications, storing data, collaborating and enhancing worker productivity. Under brands like Azure and Office 365, these cloud offerings have helped revive sales even as the traditional PC-software market continues to contract. Near the end of the quarter the company completed its biggest acquisition, the US$26.2-billion purchase of LinkedIn, whose data and professional networking tools will augment Microsoft’s own productivity products.

“As long as cloud is growing, people are happy,” said Mark Moerdler, an analyst at Sanford C. Bernstein & Co., who rates the shares outperform. “If margins are growing, people are even happier.”

Microsoft shares gained 1.2 per cent in extended trading following the report, after climbing to a record US$64.27 at the close in New York. The shares rose 7.9 per cent during the fiscal second quarter.

Azure revenue almost doubled in the recent quarter, and corporate versions of Office 365 saw sales increase 47 per cent. Almost 25 million consumers are now subscribed to Office 365, the company said.

Redmond, Wash.-based Microsoft has been spending on data centres and adding products to win new cloud customers. Chief financial officer Amy Hood said in July that gross margins, a measure of profitability, for the commercial cloud business would “materially improve” in the current year. That’s because previous years of investment are starting to pay off as those data centres support more customers.