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Microsoft reports strong quarter driven by cloud

Microsoft reports quarterly profits of $3.12bn, largely driven by the success of its focus on cloud services

Microsoft has reported profits of $3.12bn for the quarter ending 30 June 2016 and revenues of $20.6bn, driven mainly by cloud computing.  

Although overall revenues were down 7.5% compared with the same period a year ago, the profits were in sharp contrast to £3.19bn losses for the same period a year ago due to a write down of the assets acquired from Nokia.

Microsoft’s strong performance, particularly by its cloud services, boosted investor confidence and saw the company’s share price rise 4% in after-hours trading in New York, according to the BBC.

Revenue in “Intelligent Cloud” grew 7% to $6.7bn compared with the same period a year ago, with the Azure cloud services division being the best performer, with revenue growth of 102%.

Server products and cloud services revenue increased 5% and enterprise mobility customers nearly doubled year-over-year to more than 33,000, Microsoft said.

The Microsoft figures come just a day after IBM reported a 30% growth in revenue to $3.4bn for its cloud business for the same quarter compared with a year ago.

“This past year was pivotal in our own transformation and in partnering with our customers who are navigating their own digital transformations,” said Satya Nadella, chief executive officer at Microsoft.

“The Microsoft Cloud is seeing significant customer momentum and we’re well positioned to reach new opportunities in the year ahead.”

Revenue in “Productivity and Business Processes” grew 5% to $7bn, with Microsoft Office commercial products and cloud services revenue up 5% driven by Office 365 commercial revenue growth of 54%, Microsoft said.

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Office consumer products and cloud services revenue grew 19% with Office 365 consumer subscribers increasing to 23.1 million. Dynamics products and cloud services revenue grew 6% with Dynamics CRM Online paid seats growing more than two-and-a-half times year-over-year.

Microsoft has focused on its cloud services in the face of a worldwide decline in PC sales, which was reflected in the performance of its personal computing division in the past quarter.

Overall revenue for personal computing declined 4% compared with the same quarter a year ago, but Windows OEM non-Pro revenue (consumer sales) grew 27%, outpacing the consumer PC market, according to Microsoft, and Windows OEM Pro revenue (corporate sales) grew just 2%.

Xbox Live monthly active users grew 33% year-over-year to 49 million although revenue for the quarter was down 9% on the previous year. Surface revenue increased 9% driven by Surface Pro 4 and Surface Book, and search revenue – excluding traffic acquisition costs - grew 16%, but phone revenue declined 71%.

Nadella told analysts that Microsoft’s focus in the quarter had been on strategic applications, including the $26bn LinkedIn acquisition. LinkedIn, he said, will ultimately be integrated across the portfolio, driving usage across multiple products, including Office 365.

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Not surprising. More people are looking at cloud services and some still trust the name Microsoft. So they are investing in them even though there are other choices available that may be a better fit.
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