Demand surges for cloud services in latest Microsoft earnings report

Laverne Mann
October 29, 2017

This number was against the expected number of $23.56 billion predicted by analysts.

Profit in the period that ended September 30 exceeded analysts' estimates and sales rose 12 percent to $24.5 billion amid buoyant demand for Azure cloud services, used to store and run customers' applications in Microsoft's data centers.

Microsoft's flying cloud business accounted for just shy of US$7bn of that, a 14% year-over-year rise.

Shares in the company, which reported its results after the closing bell Thursday, inched up by nearly 4% to about $81.75 in after-hours trading. Microsoft attributed the strong cloud demand to the ongoing trend of digital transformation in the business world. Microsoft doesn't break out its Azure numbers, but the Canalys research firm estimates it brought in $2 billion, acccording to Reuters. Utilization is a key input to improving profitability for hyperscale cloud vendors, and we were heartened to see Commercial Cloud gross margins improve 800 basis points to 57% in the quarter. The company has just declared it can easily project an annual revenue of more than $20 billion.

Microsoft's focus on leveraging cloud services looks like it is paying off.

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By combining tools from Office 365, Windows 10, and Enterprise Mobility + Security, Microsoft 365 "represents a profound shift in the way we design, build and deliver our productivity solutions, moving to a people-centered approach, spanning all their devices to unlock creativity and inspire teamwork while simplifying security and management", he said. Microsoft is now at the top of the cloud market, but many other companies are rapidly coming from behind.

Microsoft purchased LinkedIn, the professional social network, in December for $27 billion, in part, to boost the Dynamics business.

LinkedIn, which Microsoft acquired past year, contributed revenue of $1.1bn during the quarter.

Chief Executive Officer Satya Nadella has turned Microsoft into a cloud-computing powerhouse, recently reshuffling the sales force and investing in new products and services. 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. With most of the crucial products gaining compared to last year, it allowed More Personal Computing to report flat growth for the period, helping Microsoft post double-digit net revenue growth for the quarter compared to last year.

Microsoft today declared its quarterly earning for the third quarter of 2017 this calendar year.

Other reports by MaliBehiribAe

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