Microsoft turnaround continues as profit rise
Microsoft Corp. posted betterthan-projected sales and profit, fueled by cloud services and Office productivity programs, as chief executive officer Satya Nadella's efforts to transform the software maker gain ground.
Profit excluding certain items in the fiscal second quarter, which ended 31 December, was 78 cents a share, and sales adjusted for deferrals were $25.7 billion, Microsoft said in a statement Thursday. Analysts on average estimated profit would be 71 cents on revenue of $25.3 billion, according to data compiled by Bloomberg.
Nadella is trying to remake the company around cloud services, such as the Azure computing platform and the subscription-based Office 365, which are seeing strong growth. The company is also focusing on Windows 10 to restore momentum to the operating system business and slashing costs, seeking to make up for revenue lost when it scaled back its unprofitable smartphone efforts.
"They have two things going for them-one, the belief that Nadella is driving innovation towards the cloud, and No. 2, Amy Hood has had a blowtorch out on expenses," said Brent Thill, an analyst at UBS AG, referring to Microsoft's chief financial officer. "It's a totally different vibe coming out of that place that it was three years ago."
Microsoft shares rose more than 5% in extended trading following the report, after closing at $52.06. The stock climbed 25% during the three months that ended in December on optimism about Nadella's turnaround, compared with a 6.5 percent gain in Standard & Poor's 500 Index.
Net income in the recent period declined to $5 billion, or 62 cents a share. The Redmond, Washingtonbased company in July announced it would cut as many as 7,800 jobs and take a massive writedown on its Nokia handset unit, plus take a restructuring charge as it scaled back its ambitions for making its own mobile phones.
Unearned revenue, a measure of future sales, was $25.03 billion. Three analysts polled by Bloomberg had expected $23.5 billion, on average.
Microsoft has pledged to reach annualized revenue of $20 billion in its corporate cloud business by the fiscal year that ends in June 2018. As of the September quarter, that metric stood at $8.2 billion. The company has been adding customers and workloads for its Azure services, which let clients run and store applications in Microsoft's cloud-data centers.
While the traditional Office business -- the software suite that includes Word, Excel and PowerPoint-has been lackluster in recent quarters, the Office 365 cloud versions of those programs are growing in both consumer and corporate usage.
The company's latest operating system software, Windows 10, released at the end of July, is now on running on more than 200 million devices and outpacing the previous version's adoption by almost 400%, the company said earlier this month. To promote uptake, the company offered it as a free upgrade for many consumers.