Growth In Cloud Boosts Revenue Once Again — Microsoft Earnings

Cloud computing services continue to be a major contributor to Microsoft’s booming revenue growth as the company reports its earnings for the second quarter of fiscal year 2017 ending December 31, 2016.

One of Microsoft’s strongest-performing segments has been the cloud, with the company boasting more than $14 billion United States dollars in commercial cloud annualized revenue run rate, up 49 per cent. But Nadella, on the conference call with analysts, said the company now measures deals largely in terms of cloud capacity. 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. This growth was driven by 47 percent revenue growth of Office 365, whereas other contributors – dynamic and consumer Office as well as LinkedIn didn’t amount to much.

“We see strong demand for our cloud-based services and are executing well on our long-term growth strategy”, said Amy Hood, executive vice president and chief financial officer at Microsoft. That includes $950 million of LinkedIn revenue, Microsoft said.”I am pleased with our results this quarter”.Adjusted revenue rose to $26.07 billion from $25.51 billion.

Microsoft said there are now more than 65 million active Office on iOS and Android devices, a piece of business that’s more than doubling year-over-year. During the regular session, Microsoft shares rose 0.9% to 64.27.

Redmond, Washington-based Microsoft has been spending on data centers and adding products to win new cloud customers.

That beat analysts’ average estimate of $6.73 billion, according to research firm FactSet StreetAccount.

More than $1 trillion in IT spending will be directly or indirectly affected by the shift to cloud during the next five years, Gartner estimated in July. According to her, the Microsoft OEM business grew 5 percent the last quarter due to license sales to original equipment manufacturers like Dell, Hewlett-Packard, Lenovo and others.

Microsoft has announced its financials for the quarter that ended on December 31, 2016.

“We’re not at Amazon’s margin today”, Chris Suh, head of Microsoft’s investor relations, said yesterday.

Azure’s success is a particularly positive development for Microsoft since management indicates that the segment’s performance carries over to the company’s intelligent cloud segment in its entirety.

The part of Windows revenue generated by sales of licenses to device makers – the bulk of OS income – was up 5%, a turn-about from the previous quarter when operating system sales were flat, and an even larger climb from a 5% contraction of a year ago.

It is worth noting that Microsoft’s phone revenue last quarter will have been impacted slightly by the sale of its feature phone business to Foxconn, which it said was completed in November. The first one being Productivity and Business, which saw an increase of 10 percent in revenue.