Microsoft Beats Quarterly Revenue Expectations

Microsoft today reported better-than-expected revenues and earnings-per-share (EPS) for the second financial quarter, which ended on Dec. 31.

Microsoft said its commercial cloud business -- notably the Azure, Office 365 and "intelligent cloud" services -- are on a $14 billion run-rate, continuing to drive revenues. The company also reported a 5% improvement in its Windows client business.

Revenues of $26.1 billion, including $2 billion in Windows 10 deferrals, were up 2% over the same period last year, while net income of $6.5 billion showed a 16% increase. EPS of $0.83 exceeded analyst expectations of $0.79, and are up from last year's $0.78.

Overall, Microsoft's shift to the cloud showed steady improvement. While Microsoft doesn't break out its cloud businesses, the company said Azure revenues increased 93% and CEO Satya Nadella indicated a growing attach rate during the earnings call.

"More than three out of four Azure customers are using premium Azure services," Nadella said.

Microsoft's commercial Office 365 business during the second quarter increased 47%, and consumer Office licenses and subscription revenue was up 22%. The number of Office 365 consumer subscriptions are now at 24.9 million, up from 20.6 million last year at this time.

Total revenue from Microsoft's Productivity and Business Process unit was $7.4 billion, up 12% year-over year. Dynamics revenues were up 9% with the new Dynamics 365 service boosting growth, Microsoft said.

The LinkedIn business acquired by Microsoft three weeks before the quarter closed (Dec. 8) kicked in $228 million for the period. During the call, Nadella said integrating LinkedIn with Dynamics 365 is a key priority.

Microsoft's Intelligent Cloud business revenues totaled $6.9, posting an 8% year-over-year increase, while Windows OEM revenue rose 5%. The company's Personal Computing business earned $11.8 billion but was down over last year. Search revenues grew 10% but gaming revenue decreased 3% due to lower console revenue coming at the expense of Xbox software and services.

About the Author

Jeffrey Schwartz is editor of Redmond magazine and also covers cloud computing for Virtualization Review's Cloud Report. In addition, he writes the Channeling the Cloud column for Redmond Channel Partner. Follow him on Twitter @JeffreySchwartz.


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