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Solid Cloud Growth in Microsoft Q1 Earnings

Microsoft is off to a strong start in the first quarter of its fiscal 2020, beating Wall Street expectations on both earnings and revenues as cloud products continued to perform well and the PC business benefitted from end-of-life deadlines for Windows 7.

Compared to the year-ago quarter, the company reported Wednesday that in the July-September period revenues were up 14% to $33 billion and earnings per share were up 21% to $1.38.

Growth in Azure is slowing as the business gets larger but remains robust. Microsoft reported a 59% growth rate for its enterprise cloud platform in Q1.

In a statement, CEO Satya Nadella suggested that Microsoft's cloud is winning deals from segment market share leader Amazon Web Services (AWS) and other major cloud competitors. "The world's leading companies are choosing our cloud to build their digital capability," Nadella said. He also pointed to the continuous rollout of more services and capabilities across Microsoft's cloud services stack.

While Microsoft does not break out Azure revenues in its financials, it does report figures for a segment that it calls commercial cloud. That came to $11.6 billion in revenue for the quarter, which was a 36% increase from Q1 2019.

Microsoft's three major business divisions all brought in roughly similar amounts of revenue for the quarter. More Personal Computing saw revenues of $11.1 billion, Productivity and Business Processes also had $11.1 billion, and Intelligent Cloud was $10.8 billion.

By revenue growth, Productivity and Business Processes, which includes Office, LinkedIn and Dynamics, was closest to the top-line growth revenue percentage at 13%. Intelligent Cloud, which includes Azure, server products and services, grew faster than the rest of the company with 27% revenue growth. More Personal Computing lagged the company's overall revenue growth, with a 4% increase.

Other notable highlights in the quarterly results included:

  • Revenues for the Microsoft Surface line of 2-in-1s and laptops dropped 4%.
  • Dynamics 365 had a strong quarter with revenue growth of 41%.
  • Office 365 Commercial revenue shot up 25%.
  • Windows OEM revenue was up 9% as the January 2020 support deadline for Windows 7 approaches.
  • LinkedIn revenue was up 25%.
  • Enterprise Services revenue was up 7%.
  • The Xbox unit was flat.

Posted by Scott Bekker on 10/23/2019 at 2:19 PM


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