Microsoft’s fourth-quarter sales, profit float up on strength of cloud
SEATTLE Microsoft Corp.’s quarterly sales and profit topped estimates on the strength of the company’s cloud-computing business, which racked up clients for Azure web services and Office productivity software.
Profit before certain items in the fourth quarter, which ended June 30, rose to US$1.37 a share, compared with the US$1.22 average forecast of analysts polled by Bloomberg. Revenue rose 12 per cent to US$33.7 billion, the Redmond, Wash.-based company said Thursday in a statement, compared with the US$32.8 billion projection.
CEO Satya Nadella is working to keep up a steady flow of cloud deals, seeking to centre Microsoft’s strategy on web services and narrow the gap with market leader Amazon.com Inc. As more companies move to the cloud and upgrade aging software, they’re signing up for Azure and newer products like Microsoft 365 — a package of Office 365 cloud software, Windows 10 and security programs.
“Everything has been going well for them,” said Sid Parakh, a portfolio manager at Becker Capital Management, which counts Microsoft as its biggest holding. “It’s the structural winner right now — as more and more companies move to the cloud, it’s largely Amazon and Microsoft in the running for those deals.”
Net income in the quarter was US$13.2 billion, or US$1.71 a share.
The company’s shares rose 1.2 per cent in extended trading following the report. Microsoft rose 15 per cent in the quarter, compared with a 3.8-per-cent gain in the S&P 500 Index. The stock has jumped on optimism about the company’s cloud business, and on some investors’ belief that Microsoft is a safe haven as U.S. and European regulators sharpen their scrutiny of other large technology firms.
Commercial cloud revenue — a measure of sales from Azure, internet-based versions of Office software and some smaller products — rose 39 per cent from a year earlier to US$11 billion. Profit margins in the business widened by six points to 65 per cent.
Sales of Office 365 software to businesses jumped 31 per cent. Azure cloud sales rose 64 per cent, compared with 73-per-cent growth in the previous quarter and 76 per cent in the one before that. That continued deceleration has caused some concern among investors — Azure growth was routinely more than doubling as recently as two years ago. Still, swelling profit margins in cloud have helped to offset those worries.
Since the close of the quarter, Microsoft signed new cloud deals with Providence St. Joseph Health and Servicenow Inc., which said it will use Azure to deliver cloud products to some government customers — the first time that company has used third-party data centres for its business.