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Cloud Powers Q3 Sales for Microsoft

Ongoing strength in its cloud business and a recovery on the Windows side helped power a strong third quarter for Microsoft, according to the company's latest financial results.

In results released after markets closed Wednesday, Microsoft reported earnings of $30.6 billion, an increase of 14% over the year-ago quarter and well ahead of analysts' expectations. Other headline figures included a 25% gain in operating income to $10.3 billion, a 19% gain in net income to $8.8 billion and a 20% increase in diluted earnings per share to $1.14.

CEO Satya Nadella pointed to the customer demand for Microsoft's constantly evolving cloud services as a key factor for the reporting period, Microsoft's third quarter, which ended March 31. The company pegged commercial cloud revenues at $9.6 billion for the quarter. That's a 41% jump year-over-year on an already large figure.

Inside those cloud revenues, Microsoft's strategic Azure cloud computing platform was a key growth driver. Microsoft reported 73% revenue growth for Azure. Office 365 Commercial revenue also continued to plow ahead, with 30% revenue growth. On the consumer side, Office 365 Consumer subscribers increased to 34.2 million.

One other business growth area for cloud was Dynamics 365, Microsoft's cloud platform for its ERP, CRM and other business applications. Dynamics 365 revenues increased 43% compared to the year-ago quarter.

Last quarter, the Intel chip shortage was a problem for Microsoft, with Chief Financial Officer Amy Hood at the time attributing a smaller overall PC market to the timing of chip supply to Microsoft's OEM partners. While in Q2 Windows OEM Pro revenue dropped by 2% and non-Pro revenue fell 11%, no such problems existed in Q3. Microsoft reported Wednesday that Q3 Windows OEM revenues were up 9% year-over-year. Revenues for Microsoft's own Surface products, meanwhile, were up 21% in the quarter.

In other highlights:

  • LinkedIn, which Microsoft purchased in 2016 for $26 billion, continued to perform well in the third quarter, with revenue increasing 27%.
  • Enterprise Services revenues increased 4%.
  • Gaming revenue was up 4%.
  • Search revenue increased 12%, excluding traffic acquisition costs.

Posted by Scott Bekker on 04/24/2019 at 3:09 PM


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