Microsoft earnings above estimates as cloud sales soar

WASHINGTON • Microsoft said sales of its flagship cloud product doubled in its first quarter, propelling earnings above analysts' estimates and sending its shares to an all-time high, surpassing a level hit in 1999 at the peak of the tech stock bubble.

The company's shares have doubled since August 2013, with chief executive Satya Nadella restoring investor confidence by focusing on mobile and cloud computing rather than personal computers.

Long known for its Windows software, Microsoft has shifted focus to the cloud where it is duelling with larger rival to control the still-fledgling market.

Mr Nadella has been investing in data centres and striking partnerships to bolster sales of Microsoft's main corporate cloud products, Azure and Office 365 - Internet-based versions of the popular productivity apps, e-mail and collaboration tools.

Revenue from Azure cloud services more than doubled, helping Microsoft outperform even as demand for PCs remained in the doldrums and its cellphone efforts collapsed.

Its jump in revenue underscores how businesses around the world are turning to new applications in the cloud and leaving once-critical software programs and other hardware in the dust.

Shares of Microsoft rose as much as 6.2 per cent to US$60.79 in after-hours trading. They later pared gains to US$60.43, still adding nearly US$25 billion (S$34.8 billion) to its market value.

"This transition to the cloud represents the single largest addressable market opportunity we've all seen in many, many years," said Microsoft's chief financial officer Amy Hood after the report. "There is such an opportunity to grow our overall revenue and do it profitably."

Net income in the recent period declined to US$4.69 billion, or 60 US cents a share.

Earlier this month, Mr Nadella said the company has spent US$3 billion on data centres in the continent to expand cloud services. He promised continued investments there, including new sites in France next year.

Microsoft has pledged to reach annualised revenue of US$20 billion in its corporate cloud business by the fiscal year that ends in June 2018.

Worldwide PC shipments in the September quarter were a smidgen better than expected - a decline of 3.9 per cent, compared with a 4.1 per cent drop in the prior period, researcher IDC said. Sales in the firm's More Personal Computing business, including Windows and Xbox, slipped 1.8 per cent from a year ago to US$9.29 billion.


A version of this article appeared in the print edition of The Straits Times on October 22, 2016, with the headline 'Microsoft earnings above estimates as cloud sales soar'. Print Edition | Subscribe