Microsoft reports a big beat on earnings, stock spikes up nearly 4%

Microsoft reports a big beat on earnings, stock spikes up nearly 4%

Microsoft said commercial cloud annualised revenue run rate reached US$20.4b in the quarter. Office products were also a highlight of the quarter, with commercial Office and consumer Office revenues up by 10 percent and 12 percent, respectively. (As a whole, Microsoft's revenue was up 12 percent.) Stifel analysts Brad Reback and Adam Borg were expecting Azure - which is larger than Google's cloud and second only to Amazon Web Services - to generate $1.3 billion in revenue, which would have been up 90 percent year over year.

Chief Executive Officer Satya Nadella has turned Microsoft into a cloud-computing powerhouse, recently reshuffling the sales force and investing in new products and services.

Over the last few quarters, Microsoft's Surface line reported declining revenue numbers as the company prepared to launch new products. Microsoft reported adjusted per-share earnings of 84 cents.

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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 of four analysts polled by Bloomberg. His efforts have helped win over customers like Bank of America Corp. for Azure, No. 2 behind the biggest part of the cloud market, and internet-based Office 365 workplace tools.

Azure's strong performance helped lift the gross margin at Microsoft's cloud business to 57 percent, said Stephanie Rodriguez, director of investor relations for Microsoft. Productivity revenue, mainly Office software, climbed 28 percent to $8.2 billion. Office 365 commercial revenue has increased by 42 percent while the consumer version of Office 365 now has 28 million subscribers.

Despite the growth in those areas, the continued winding down of Microsoft's smartphone business continued to take its toll, with "immaterial" phone revenue contributing 3% points of decline to the More Personal Computing unit's numbers. Profit for the quarter climbed to $6.6 billion from $5.7 billion in the first quarter a year ago. The business of licensing Windows out to PC manufacturers was up 4%. Search acquisition costs jumped 15 percent. Notably, Surface sales has gone up for the first time in a long while.

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