Microsoft Sales and Profit Top Estimates

Microsoft’s first-quarter sales and earnings topped analysts’ estimates, buoyed by growing demand for cloud-based software and services, according to Bloomberg.

Profit excluding certain items was 76 cents a share on adjusted sales of $22.3 billion, company said in a statement. Analysts on average estimated profit in the period ended Sept. 30 would be 68 cents on revenue of $21.7 billion, according to data compiled by Bloomberg. Shares surged to a record in extended trading.

Chief Executive Officer Satya Nadella has been investing in data centers and striking partnerships to bolster sales of Microsoft’s main corporate cloud products, Azure and Office 365 - internet-based versions of the popular productivity apps, e-mail and collaboration tools. Revenue from Azure cloud services more than doubled, helping Microsoft outperform even as demand for PCs remained in the doldrums and its mobile-phone efforts collapsed.

Earlier this month, on a swing through Europe, Nadella said the company has spent $3 billion -- $1 billion in the past year alone -- on data centers on the Continent to expand cloud services. He promised continued investments there, including new sites in France next year. Hood said in July that gross margins for commercial cloud would "materially improve" in the current year. That’s because previous years of investment are starting to pay off as those data centers support more customers. Commercial cloud gross margin in the recent period was 49 percent, 7 points wider than in the prior quarter.

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 $13 billion at the end of the fiscal first quarter. The company has been adding customers and workloads for its Azure services, which let clients run and store applications in Microsoft’s data centers.