Microsoft Exceeds Sales and Profit Estimates on Cloud Gains

Microsoft Exceeds Sales and Profit Estimates on Cloud Gains

Microsoft’s second-quarter sales and profit exceeded analysts’ projections, bolstered by rising customer sign-ups for cloud-based services and a stabilizing personal-computer market, according to Bloomberg. Profit excluding certain items, such as a few weeks of results from newly acquired LinkedIn, was 84 cents a share on adjusted sales of $25.8 billion. Analysts on average had estimated profit would be 79 cents on revenue of $25.3 billion in the period ended Dec. 31.

CEO Satya Nadella is reformulating the company as a seller of internet-based corporate services for running applications, storing data, collaborating and enhancing worker productivity. Azure cloud services revenue almost doubled, keeping up its steady pace of growth, and both consumers and corporations continue to purchase Office 365, which includes software like Word and Excel, Microsoft said. Another surprising bright spot was the PC market, which is showing signs of life after years of contraction.

Azure revenue almost doubled in the recent quarter, and corporate versions of Office 365 saw sales increase 47 percent. Almost 25 million consumers are now subscribed to Office 365, the company said. Microsoft has been spending on data centers and adding products to win new cloud customers. Microsoft has pledged to reach annualized revenue of $20 billion in its corporate cloud business by the fiscal year that ends in June 2018. That metric stood at more than $14 billion at the end of the second quarter.

Second-quarter sales in the company’s More Personal Computing business, including Windows and Xbox, fell 5 percent to $11.8 billion. That compares with the $11.44 billion average estimate of five analysts polled by Bloomberg. Gaming revenue for Xbox and PC fell 3 percent. Revenue from sales of Windows to PC maker partners rose 5 percent, and Windows commercial products and cloud services increased at the same rate.

In the Intelligent Cloud unit, comprised of Azure and server software deployed in customers’ own data centers, sales increased 8 percent to $6.9 billion, compared with the $6.68 billion average analyst estimate. Productivity revenue climbed 10 percent to $7.4 billion. Analysts had estimated $7.02 billion. Including LinkedIn and other items, net income in the second quarter rose to $5.2 billion, or 66 cents a share.

On a conference call, Microsoft said third-quarter sales in Productivity will be $7.65 billion to $7.85 billion. Intelligent Cloud revenue will be $6.45 billion to $6.65 billion, and More Personal Computing sales will be $9.05 billion to $9.35 billion.