84 cents a share vs 72 cents EPS expected — Microsoft earnings

84 cents a share vs 72 cents EPS expected — Microsoft earnings

84 cents a share vs 72 cents EPS expected — Microsoft earnings

Under Chief Executive Satya Nadella, Microsoft's cloud business - which includes products such as Office 365, Dynamic 365 and the flagship Azure computing platform - has emerged as a major source of growth. Azure gross margins were a "key component" of the 8 percentage point improvement in commercial cloud services from the same period past year, Chief Financial Officer Amy Hood said.

Microsoft's shares had risen almost 27 per cent this year through Thursday, eclipsing the 14.4 per cent gain in the broader S&P 500. But the big number as always was Azure revenue, which grew 90 percent.

"We're seeing customers, as they continue to use Azure, start to consume the premium services", like AI and data analytics software that are much more profitable, Hood said in an interview.

"We have been impressed by solid execution and strong customer adoption of Microsoft's cloud applications and platforms", KeyBanc analyst Brent Bracelin wrote. It is a market where Microsoft competes with Salesforce.com Inc., among others, and one in which the company has placed growing emphasis.

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Despite Microsoft's More Personal Computing division remaining relatively flat (which, historically is a good thing) there were gains to be had for a few standout products. The overall market has continued to contract, and Microsoft's Surface devices fluctuate in popularity based on competition and when new devices hit store shelves. Search ad revenue excluding traffic acquisition costs grew 15%, and Surface revenue rose 12% driven by Surface Laptop sales. The segment declined earlier in 2017 owing to aging Surface Pro products that consumers shunned.

Wall Street was expecting Microsoft to report first quarter earnings of 72 cents a share on revenue of $23.56 billion.

Intelligent Cloud revenue was $6.9 billion and increased by 14 percent. Revenue in Intelligent Cloud rose 14% to $6.92 billion, while revenue in Productivity and Business Processes climbed 28% to $8.24 billion. Windows OEM revenue was up 4 percent while Windows comercial revenue increased 7 percent. Analysts had estimated $8 billion.

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