Cloud services and Office lead Microsoft to a healthy Q4

In recent quarters Microsoft has been breaking out the impact from different business segments, providing a more granular view of how each is doing. But the big highlight as always was Azure revenue, which grew 93 percent, and usage of Azure compute, which more than doubled year over year once again. Looking at all of Microsoft’s commercial cloud businesses, which include Azure, the company is on track to make $14 billion annually, the company said. Chief Executive Brian Krzanich, though, told analysts on a conference call to discuss the company’s earnings results that the chip maker has a slightly more conservative view on the PC market in 2017 than market-research firms. “We’re seeing great momentum in Google’s newer investment areas and ongoing strong progress in Other Bets”, Alphabet CFO Ruth Porat said in a statement.

Microsoft has pledged to reach annualised revenue of US$20 billion in its corporate cloud business by the fiscal year ending June 2018.

In July 2016, Gartner predicted more than $1tn in IT spending will be directly or indirectly targeted away from traditional IT delivery models and to the cloud between now and the year 2020.

Stock prices reflect this optimism.

People hoping for a rebound in personal computer sales saw a glimmer of hope in Microsoft’s latest earnings. In early trading Friday, Microsoft was up 1.6 percent, Google was down 1.1 percent and Intel gained less than 1 percent.

Chief Executive Satya Nadella has been trying to reinvigorate Microsoft since taking over the lumbering giant almost three years ago, and has helped build more credibility around the company’s efforts in areas such as cloud-based services. Partners that have leveraged Microsoft’s digital transformation playbooks, for example, have seen a 20-30 percent “lift” in their sales within the a year ago, Persaud said.

The other products in the Productivity and Business Processes segment are consumer Office 365 subscriptions (now over 24.9 million), Dynamics 365, and LinkedIn, which contributed $228 million in revenues for the quarter, a net loss of $100 million. Essentially, with respect to Office 365, what we are seeing is 50% revenue growth rates lapping 70% growth rates and 900,000 new subs per quarter. Chief Financial Officer Amy Hood said in July that gross margins, a measure of profitability, for the commercial cloud business would “materially improve” in the current year. Much of that performance was fueled by sales of its F-Series pickups, which Ford said became the best-selling truck in America for the 40th straight year. The one silver lining is that Microsoft’s revenue from licensing Windows 10 to PC makers was up 10 percent; too bad Gartner says we’re in 5th straight year of declining PC sales. They offer cloud-based solutions that provide customers with software, services, platforms, and content.

“We’re not at Amazon’s margin today”, said Suh. For the quarter, sales from Microsoft’s Intelligent Cloud business segment, which includes Azure, climbed 8 percent to $6.9 billion.

Bernstein ” s Mark Mordler estimates it is probably “low 20s” as a percentage of Microsoft’s “commercial cloud” total.