Microsoft Corporation (MSFT) Surges After Earnings Beat

Right after Microsoft reported its better-than-expected performance for the previous quarter, its stock price jumped by more than 7 percent. While it’s still far from the company’s largest business, revenue from Surface devices grew 29 percent year on year to $1.35 billion on the back of good Surface Pro 4 and Surface Book sales.

Shares of Microsoft climbed by as much as 7.89% to $56.16 per share in after-hours trades.

The Intelligent Cloud business improved by 5 percent, Microsoft says, with server products and Azure growing 10 percent and 140 percent, respectively. Non-GAAP second quarter earnings of 78 cents a share on revenue of $25.7 billion, down 2 percent from a year ago.

Looking at Microsoft’s “More Personal Computing” segment which envelopes all its consumer hardware, a five per cent revenue decline was experienced in FY16 Q2.

Free cash flow for the quarter rose 25% to $3.6bn and the annualised run rate of commercial cloud revenues rose 70% year on year to $9.4bn.

Microsoft is clearly building momentum in its business as it decouples itself from its traditional business and transitions focus onto cloud, where it has a 10% share and is second only to Amazon Web Services.

“It was a strong holiday season for Microsoft highlighted by Surface and Xbox”, explains Kevin Turner, chief operating officer at Microsoft. The company took in $23.8 billion in revenue, $6 billion in operating income, and $5 billion in net income for the quarter.

The Redmond, Washington-based tech company reported $5 billion in profit on almost $24 billion in sales for the quarter ending December 31.

One thing to note about Microsoft’s earnings report is the decline of its smartphone business, with revenue falling by 49 percent. On a constant-currency basis, revenue grew 11% but slowed from the 14% growth it posted in the first quarter.

The company is already seeing an increase in sales of apps and online advertising, tied to new features in Windows 10, Nadella told analysts Thursday.

Microsoft CEO Satya Nadella argued that the numbers of businesses that are piloting Windows 10 leads it to expect that it will be installed on over 200 million active devices in the coming year.