Microsoft earnings on ‘cloud’ nine
seattle — Microsoft’s earnings report and forecast cheered investors, providing further evidence the company can increase cloud sales and squeeze more profit from the area while cutting into Amazon.com’s massive industry lead.
Profit and revenue in the period ended June 30 exceeded analysts’ estimates, as did Microsoft’s projection for cloud sales in the current quarter. Chief financial officer Amy Hood pledged that commercial cloud margins would improve overall and for each of the products that make up the area — Azure, Office 365 and cloud-based customer software.
“The expectation was that margins were going down and that growth would decelerate — you didn’t hear any of that,” said Mark Moerdler, an analyst at Sanford C. Bernstein & Co, who said he rates the shares “screaming outperform”.
Microsoft’s shares rose about three per cent in extended trading after Hood unveiled a forecast that envisioned fiscal first-quarter Intelligent Cloud sales of as much as $8.35 billion, compared with an average analyst estimate of $7.95 billion. Even the company’s projection for higher operating expenses and capital spending to build more data centers couldn’t dampen enthusiasm as it was seen as a sign of customer demand for cloud products.
Chief executive officer Satya Nadella has been overseeing steady growth in the company’s Azure and Office 365 cloud businesses. Surveys of customer chief information officers by both Morgan Stanley and Sanford C. Bernstein published in the past month show an increase in companies signing up for or planning to use Microsoft’s cloud products. Revenue from cloudcomputing platform Azure rose 89 per cent in the quarter, while sales of web-based Office 365 software to businesses climbed 38 per cent. Microsoft also saw a bump from relative improvements in the corporate personal-computer market, which has been stagnant for years.
“Azure has been hot and Office 365 too, said Dan Morgan, a senior portfolio manager at Synovus Trust, which owns Microsoft shares. “Microsoft has made huge strides and done wonderful things to turn the company around. They were on a death track with hanging everything on the personal computer.” —