Cloud computing boosts Microsoft's Q4 earnings

Microsoft's net income more than doubled to US$6.51 billion or 83 US cents per share in the quarter.
Microsoft's net income more than doubled to US$6.51 billion or 83 US cents per share in the quarter.PHOTO: REUTERS

Shift from PC software business to cloud and subscription-based software paying off

SAN FRANCISCO • Microsoft reported strong fourth-quarter earnings on the back of its fast-growing cloud computing business, stoking optimism that the once stagnant company has found a new groove.

The results, released on Thursday, were the clearest sign yet that the strategy put in place by chief executive Satya Nadella when he assumed the job in 2014 is paying off.

He has shifted the company's focus away from a dying personal computer software business and is reinventing it as a provider of cloud computing and subscription-based software.

"Our technology world view of an intelligent cloud and an intelligent edge is resonating with customers everywhere," Mr Nadella said.

Revenue from the cloud unit, which includes the flagship Azure platform and server products, rose about 11 per cent to US$7.43 billion (S$10.14 billion) in the fiscal fourth quarter ended June 30.

Revenue from Azure, which competes with Amazon.com's market-leading AWS division, nearly doubled in the quarter.

Highlighting Azure's growth were notable increases to Microsoft's long-term unearned revenue, which rose by more than 61 per cent year on year.

In a bid to continue this momentum, Microsoft last week launched Azure Stack, a new service that allows customers to run a local version of the firm's cloud technology.

Analyst Michael Turits noted that Azure is smaller than Amazon's service but that it is growing faster.

"I think it is appealing well to existing enterprise customers who might not immediately be drawn to the Amazon platform," he said.

Beyond cloud, Microsoft's various businesses mostly performed well. The commercial offering of Office 365 was up 43 per cent while Dynamics 365, Microsoft's customer relationship management and enterprise resource planning service, saw a year-on-year increase of 74 per cent.

Revenue dropped 2 per cent in the personal computer division, which includes Windows 10 and Microsoft's line of Surface hardware. The company said it recorded US$306 million in restructuring charges after a reorganisation of its sales and marketing teams. The restructuring resulted in layoffs for thousands of Microsoft employees.

Microsoft's net income more than doubled to US$6.51 billion or 83 US cents per share in the quarter, from US$3.12 billion or 39 US cents per share in the period a year earlier. Excluding one-time items, Microsoft earned 98 US cents per share. On an adjusted basis, revenue rose 9.1 per cent to US$24.7 billion.

REUTERS

A version of this article appeared in the print edition of The Straits Times on July 22, 2017, with the headline 'Cloud computing boosts Microsoft's Q4 earnings'. Print Edition | Subscribe