Microsoft bounces back to black on cloud business

SAN FRANCISCO • Sharp growth in its commercial cloud computing business helped lift Microsoft's quarterly revenue above Wall Street's expectations, sending the technology company's shares up more than 4 per cent in after-hours trading late on Tuesday.

Microsoft recorded a profit of US$3.1 billion (S$4.2 billion) in the quarter just ended, swinging into the black a year after hefty charges from writing off mobile phone assets. The profit in the tech giant's fourth fiscal quarter was nearly identical to the loss from a year earlier, when it took charges of more than US$7 billion to reflect the lower value of the Nokia mobile phone division it had acquired.

The new and growing cloud business - essentially selling computing services and storage in its data centres to corporate customers - is one of the priorities for CEO Satya Nadella, who took the helm of the world's largest software company in early 2014.

Mr Nadella has refocused the company on cloud and mobile in the face of stagnation in its traditional PC-based Windows business.

"Only two companies are setting the tone of enterprise computing, Microsoft Azure and Amazon AWS," said Global Equities Research's managing director Trip Chowdhry, referring to Amazon. com Inc's Web services unit.

"These are the only two initiators in the whole enterprise space that are going to see growth in excess of 80 per cent year-over-year for at least two or three years."

Revenue dipped to US$20.6 billion from US$22.2 billion in the same period a year ago.

Overall, the results were better than most forecasts and sparked an after-hours gain of more than 3 per cent for the company, which is seeking to shift its emphasis to cope with declining sales of personal computers.

"This past year was pivotal in both our own transformation and in partnering with our customers who are navigating their own digital transformations," said Mr Nadella said on Monday.

He said at a conference call that "we're proud of what we achieved and particularly how we are positioned for new growth".

Microsoft closed out its fiscal year with a 38 per cent rise in profit to US$16.8 billion.


A version of this article appeared in the print edition of The Straits Times on July 21, 2016, with the headline 'Microsoft bounces back to black on cloud business'. Print Edition | Subscribe