Microsoft’s push into the cloud forged ahead last quarter, with demand for online versions of Office productivity software and the Azure web-services business bolstering sales and earnings, according to Bloomberg.
Profit in the period that ended Sept. 30 exceeded analysts’ estimates and sales rose 12 percent to $24.5 billion amid buoyant demand for Azure cloud services, used to store and run customers’ applications in Microsoft’s data centers. Net income in the recent period was 84 cents a share, Microsoft said in a statement.
Commercial cloud revenue was $20.4 billion on an annualized basis, meeting the company’s $20 billion target previously set for the fiscal year that started July 1. At the same time Microsoft has been making progress in increasing the profitability of these services, with commercial cloud gross margin widening to 57 percent.
Azure sales rose 90 percent. Microsoft said earlier this month that Bank of America will use both Azure and Office 365 as it shifts more of its operations to the cloud. The Office product line, which consists of internet-based versions of Word, Excel and other workplace productivity software, posted sales growth of 42 percent.
Revenue has been patchier in personal-computer software and hardware. The overall market has continued to contract, and Microsoft’s Surface devices fluctuate in popularity based on competition and when new devices hit store shelves. Surface hardware sales jumped 12 percent largely driven by the new Surface Laptop.
Total revenue in the company’s More Personal Computing division, which also includes the Windows operating system, was $9.4 billion, beating the $8.8 billion average estimate. In the Intelligent Cloud unit, made up of Azure and server software deployed in customers’ own data centers, sales climbed 14 percent to $6.9 billion, compared with the $6.7 billion average analyst projection. Productivity revenue, mainly Office software, climbed 28 percent to $8.2 billion. Analysts had estimated $8 billion.
During the current quarter, the launch of the new Xbox One X console, combined with higher device sales during the holiday season, will pressure margins. The company expects revenue in More Personal Computing to reach as much as $12.1 billion. They also forecast as much as $8.95 billion in Productivity revenue, while Intelligent Cloud should book sales of $7.35 billion to $7.55 billion.
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