Microsoft beats profit estimates on gains from cloud services

Microsoft beats profit estimates on gains from cloud services [ad_1]

Microsoft Corp reported better-than-expected quarterly profit on Thursday as demand for its cloud computing services for companies rose and its personal computer software business stabilized.

Shares of the world's largest software company rose 3.1% to $81.20 in trading after the bell.

Microsoft's focus on fast-growing cloud applications and platforms is helping it beat slowing demand for personal computers that has hurt sales of Windows - the software that powered the company to the top in the 1990s.

Under Chief Executive Satya Nadella, Microsoft's cloud business - which includes products such as Office 365, Dynamic 365 and the flagship Azure computing platform - has emerged as a major source of growth. Revenue from Microsoft's intelligent cloud business rose nearly 14% to $6.92 billion in Microsoft's fiscal first quarter, ended Sept. 30. Analysts on average had expected $6.70 billion, according to financial data and analytics firm FactSet.

Revenue from Azure, which competes with Amazon.com Inc's Amazon Web Services and offerings from Alphabet Inc's Google, IBM and Oracle Corp, grew 90% compared to a 97% growth rate in the preceding quarter.

Azure's strong performance helped lift the gross margin at Microsoft's cloud business to 57%, said Stephanie Rodriguez, director of investor relations for Microsoft.

Microsoft said its commercial cloud annualized revenue run rate reached $20.4 billion in the quarter. In 2015, Nadella set a target of $20 billion in cloud revenue by 2018.

In a call with analysts after earnings, Nadella said retailer Costco Wholesale Corp recently chose Azure its hybrid cloud platform.

Revenue from Microsoft's personal computing division, its largest by revenue, fell 0.2% to $9.38 billion but handily beat analysts' estimate of $8.81 billion.

The unit includes Windows software, Xbox gaming consoles, online search advertising and Surface personal computers.

After two straight quarters of declining Surface revenue, Microsoft notched a 12% year-over-year increase in revenue for its tablets and laptops in the latest quarter, helped by the release of a new Surface in May.

Microsoft also benefited from a 13% year-over-year increase in revenue from Dynamics, its enterprise and sales software business which competes with Salesforce.com Inc.



"Even though best in class is Salesforce, Microsoft has a good enough product to get a large amount of business," said Kim Forrest, an equity analyst at Fort Pitt Capital Group.



"Microsoft is set for an acceleration of growth and bookings with margin concerns that were overblown heading into 2018," said Daniel Ives at research firm GBH Insights. "A slowly improving PC environment is also a modest tailwind for Microsoft with cloud remaining the Trojan horse growth driver for Redmond over the coming years."



The technology company, based in Redmond, Washington, reported net income of $6.58 billion, or 84 cents per share, up from $5.67 billion, or 72 cents per share, a year earlier.

Here’s how Apple, Google, Microsoft make money

Here’s how Apple, Google, Microsoft make money

Whenever we talk about the biggest technology companies in the world, some of the names that almost always come up are Apple, Alphabet (parent of Google), Microsoft, Amazon and Facebook. All of these tech giants have revenues running into billions of dollars, which they earn through different digital products and services. Ever wondered how much these companies’ biggest products contribute to their total revenue? Read on to find out. Note: The list is based on a recently shared report by Visual Capitalists website.

Apple

The major part of Apple’s revenues, according to the Visual Capitalists report, comes from the iPhone. While the iPhone contributes 63% to Apple’s revenues, the iPad and iMac bring 10% and 11% of revenue respectively. Other products such as accessories and more bring 5% revenue, while services such as iCloud, Apple Music, iTunes and more generate 11% of the total revenue.

Microsoft

The Redmond-based technology corporation has the most evenly distributed revenue table. Microsoft Office generates 28% of the company’s revenue, followed by Windows Server & Windows Azure, which bring in 22% revenue. The Xbox division, Windows OS, Bing & other advertising, as well as the Surface division generate 11%, 9%, 7% and 5% revenue respectively. The remaining 18% is classified as ‘Other’.

Alphabet

The parent company of Google, Alphabet gets majority of its revenue (88%) from advertising using Google AdWords and YouTube. Google Play services and Pixel products bring in 11% of the revenue share. Other subsidiaries like Nest, Verily, Google Fiber and more generate 1% of the total revenue, says Visual Capitalists report.

Facebook

Social media giant Facebook, as expected, generates its massive revenue from Facebook Ads. This division alone contributes up to 97% of the company’s total revenue. Remaining 3% is classified under ‘Others’ by the report.

Amazon

Amazon, the world’s largest e-commerce company, gets majority (72%) of its revenue from the online shopping business. Amazon Prime and other media services bring in 18% of the total revenue, followed by Amazon Web Services that contributes 9% of total share. 1% is generated by the ‘Others’ segment, according to Visual Capitalists report.

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