Microsoft Q4 2018 earnings anchored by commercial cloud revenue growth

While Microsoft has reorganized its structure and de-emphasized its Windows PC operating system efforts – once the company’s flagship business – corporate sales of the software still generate considerable revenue.

On an adjusted basis, the company earned $1.54 per share, beating analysts’ estimate of $1.51, according to Thomson Reuters I/B/E/S. Revenue rose 4% to $682.4mn, but came in below estimate of $686mn.

Microsoft announced Q4 revenue of $30.1 billion and net income of $8.9 billion or $1.14 per share, up 10% year over year, to close out their fiscal 2018.

Microsoft, riding on growth recorded an operating income of $35.1 billion with the rise of 21 percent in revenue for the fourth quarter that ended on June 30.

Shares were up more than three percent to $107.80 in after-hours trading following the release of earnings for the quarter ending the fiscal year quarter for Microsoft.

The company made an $8.7bn profit in the quarter.

Microsoft’s has hit US$100bn in yearly revenue for the first time in the company’s history due to a surge in customers for its cloud-based services.

During the fourth quarter, the company also agreed to acquire code-sharing website GitHub Inc. for $7.5 billion in stock, aimed at accelerating moves into the cloud and artificial intelligence. Commercial Cloud brought Microsoft $6.9 billion in revenue, up 53 percent.

Microsoft is less specific about individual elements of its business, but Office 365 revenue was up 38 per cent, Dynamics 365 was up 61 per cent, and server products and cloud services jumped 26 per cent.

Microsoft is also “already seeing strong customer demand” for its recently introduced Azure Stack and Azure Sphere “cloud-to-edge solutions”, he said.

Microsoft 365 is now a multibillion-dollar business, according to Nadella.

Productivity and Business Processes, the unit that includes Microsoft Office, was up 13% from the year-ago period, to $9.7 billion. Microsoft’s gaming revenue also did well, growing by 39 percent to $2.29 billion. As noted above, the Intelligent Cloud component businesses were probably the best performers, but nothing looks week. “It’s hard to argue with anything here”, he said.

Delivering the cloud vision, Satya Nadella.

“The law of large numbers is kicking in”, Evercore ISI analyst Kirk Materne told CNBC in an interview, referring to Azure’s growth. The company spent $14.73 billion on research and development during the year. Analysts predicted earnings of $1.08 per share on $29.22 billion in revenue.

The Microsoft of 2018 is a different beast to what Nadella took on when he became CEO in 2014.