Microsoft’s cloud sales buffer pain from Windows
Firstquarter adjusted revenue of $22.3B easily beats analysts’ forecasts
Microsoft’s full embrace of cloud computing boosted revenue in the September quarter, but the world’s pivot away from personal computers remained a drag on the company’s performance.
Microsoft reported first-quarter 2017 adjusted earnings of 76 cents a share on adjusted revenue of $22.3 billion Thursday. That easily topped the 68 cents and $21.7 billion analysts predicted, according to S&P Global Intelligence.
Microsoft shares (MSFT) surged 6% in after-hours trading to an all-time high of $60.74, set to top a sub$60 mark notched in December 1999.
The challenges facing Microsoft’s turnaround from its glory days as a software seller remain apparent. First-quarter reported revenue was nearly flat at $20.45 billion compared with $20.38 billion in the year-ago quarter, while net income fell 4% to $4.8 billion.
Personal computing revenues declined 2% to $9.3 billion, which included a 72% drop for Microsoft’s ill-fated phones business and a 5% drop in gaming. Windows OEM and commercial products revenue both remained flat.
Helping boost the quarter were gains in productivity and business processes, up 6% to $6.7 billion, and intelligent cloud, up 8% to $6.4 billion.
That cloud jump includes a 116% improvement for Microsoft Azure, which has roughly 10% of the global market compared with industry leader Amazon Web Services at 30%. Microsoft CEO Satya Nadella has predicted that the company would hit $20 billion in annual cloud revenue by 2020.
“The biggest takeaway from this quarter’s results will be the re-acceleration of Microsoft’s cloud business, which now is on pace for more than $13 billion annualized revenue,” says Josh Olson of Edward Jones Research. “Microsoft now is approaching equal footing with AWS cloud platform in terms of aggregate cloud revenue and is steadily transforming its business to the next era of computing.”
Plummeting Lumia phone sales were a “blemish” on the quarter, says Patrick Moorhead of Moor Insights and Strategy.