Microsoft Q1 2018 Results Show Strong Growth in Cloud Services

29 October, 2017, 01:16 | Author: Alicia Barber
  • Microsoft earnings: 84 cents a share vs 72 cents EPS expected

To support its growing cloud business, Microsoft is doling out huge sums to build expensive data centers around the world.

MICROSOFT DELIVERED better-than-expected earnings for the past quarter, driven by strong growth Surface and cloud computing businesses. Collectively, Office commercial and consumer revenue grew 10% and 12%, respectively, solidifying our view that the Office transition will allow Microsoft to capture greater lifetime customer value (and ultimately greater total revenue) out of the franchise.

Microsoft's focus on leveraging cloud services looks like it is paying off. The company said the growing Azure portfolio has helped attract new enterprise customers looking to improve efficiency and advance their digital business goals.

"Across major industries - from finance and energy sector to retail and professional sports - organizations are betting on Microsoft to help them transform their customers' experiences, employee productivity, operations and products", said executive vice president Judson Althoff. Among the companies using Azure services for digital business are Bank of America, Symantec, BP, Steelcase, and Huawei.

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Customers increasingly are moving up the stack, from Azure infrastructure to "premium services" that rely on data-centric capabilities, like artificial intelligence and edge computing, Nadella said. Microsoft is now at the top of the cloud market, but many other companies are rapidly coming from behind.

The company's productivity and business processes division, which includes the Office suite, LinkedIn and other items, had $1.1 billion in revenue, exactly the same as in the previous quarter.

Microsoft's Azure cloud platform alone saw 90 per cent growth year-on-year, and it also saw decent gains in a wide variety of its business units, from its Office 365 commercial product (up 42 per cent year-on-year) to its Xbox software and services (up 20 per cent). Windows OEM Pro, which derives its revenue from the business PC market, saw its revenues grow 3% in 2Q17. "Then lift, shift turns to lift, shift and modernize", Nadella said. "Microsoft 365 is our core offering to address this $500 billion-plus market". Operating income is expected to be anywhere from $300 million to $1.65 billion, compared with $1.3 billion in the fourth quarter of 2016.

LinkedIn sales were broadly flat at US$1.1bn.

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