Microsoft shares get a boost from earnings report

The company saw revenue figures of $25.7 billion, surpassing our estimate of $25.111 billion.

The better than expected results were driven mainly by Microsoft’s cloud services division, which reported a 5% year-on-year revenue hike to $6.3bn, accounting for more than a quarter of the company’s total revenue. Office commercial products and cloud services revenue grew 5 percent with Office 365 revenue growth of almost 70 percent.

Microsoft Corp.’s fiscal second quarter showed that its cloud-computing efforts are paying off with major revenue growth and improved profit margins, offsetting declines in its PC businesses.

“Businesses are also piloting Windows 10, which will drive deployments beyond 200 million active devices”, the Indian-born top executive added.

The 8 per cent non-GAAP profit rise on last year’s results has left investors pleased, with shares up a similar 8 per cent on the news.

Revenue from Productivity & Business segment declined 2%, down to $6.7 billion, as opposed to the 3% decline in the quarter prior, as the company transitioned from software licensing to Office 365 subscriptions for clients.

Microsoft’s server products and cloud services revenue grew 10 percent this quarter, alongside a big Azure revenue increase of 140 percent.

Although Microsoft said Xbox hardware revenue fell because of lower volumes of Xbox 360 sales, it wouldn’t get specific about the number of next-generation consoles it sold during the recent quarter.

Q2 continued to reflect the power of Nadella’s focus on cloud, which has consistently been a strong source of revenue for the company.

“The enterprise cloud opportunity is massive – larger than any market we’ve ever participated in”, Nadella said on a conference call to discuss the financial results.

Redmond, Wash.-based Microsoft’s stock had climbed more than 26 per cent in the past 12 months to $52.06 at Thursday’s close, even as the broader market has dropped 5 per cent. The shares rose 3 per cent in after-hours trading.

A Microsoft logo is seen at a pop-up site for the new Windows 10 operating system at Roosevelt Field in Garden City, New York July 29, 2015.

The cloud growth is a bright spot for the company and is important to watch as the market moves toward greater use of cloud resources for software, infrastructure and application development.