Microsoft’s Bet On The Cloud Is Paying Off

Revenue from Intelligent Cloud grew 5pc to $6.3bn with Server revenues jumping 10pc and Azure revenues up 140pc.

Revenues at Microsoft fell by one-tenth in the last quarter of 2015, while profits fell by 15 per cent, both largely as a result of falling PC sales.

Microsoft broke with tradition past year by releasing Windows 10 as a free upgrade for older PCs, with no charge for future updates. Windows 10 adoption continues to outstrip expectations, with roughly 200 million devices running the operating system. The giant reported revenue of $25.7 billion, beating consensus by $440 million, down 2.9% from a year ago; while earnings per share of $0.78 were reported, which beat consensus by $0.07. The Intelligent Cloud (IC) business, which includes service revenue and Enterprise Services, generated $6.4 billion, compared with $5.9 billion in the third quarter, more of what analysts want to see.

All thanks to Microsoft which sold only 4.5 million Lumia mobile devices in the recent quarter, as compared to 10.5 million units sold in the same period previous year, according to The Verge. Other companies like Google and IBM lag behind, as Microsoft’s growth in cloud accelerates.

Microsoft started off its 2016 fiscal year by implementing a change to its financial reporting structure.

“They are a software-first company in a world that is increasingly about software”.

Dynamics was a high point with 11 percent revenue growth in constant currency and a year-over-year doubling of Dynamics CRM Online seat adds.

Nadella says he expects that growth in commercial cloud will come from spaces where Microsoft hasn’t played so much before, such as Linux workloads, Infrastructure-as-a-Service (IaaS), Platform-as-a-Service (PaaS) and mobile cloud.

The company reported a rise in unearned revenue balances of $19.8bn, up 8% in constant currencies, representing services that have been paid for up front, but not yet delivered.

“It was a strong holiday season for Microsoft highlighted by Surface and Xbox”, said chief operating officer Kevin Turner, referring to the company’s tablet computer family and gaming console. The company still trails market leader Amazon Web Service, but beats AWS in terms of growth.

“Our commercial business executed well as our sales teams and partners helped customers realise the value of Microsoft’s cloud technologies”.