Microsoft Posts Profit on Ongoing Cloud Businesses Growth

Microsoft said Wednesday it swung to profit in the past quarter on Profits from cloud computing and business services, but shares took a hit on disappointing revenue growth.

It met Wall Street’s goals because of its quarterly results and forecast, though Azure cloud computing earnings grew more slowly than a year earlier.

Chief executive Satya Nadella stated Microsoft continues to observe profits from its own cloud services after having shifted away from most of its consumer offerings. “Our strong commercial cloud results reflect our deep and growing partnerships with major businesses in every industry including retail, financial services and health care,” Nadella said. “We’re delivering differentiated value throughout the cloud and edge as we work to earn customer trust daily,” he added.

The conversion of Microsoft has brought it back to the ranks of the world’s most valuable businesses after years of lagging behind the likes of Apple and Google. Microsoft ended the afternoon in a virtual tie with Amazon, with a market valuation of more than $800 billion for each of those businesses.

Microsoft reported a profit of $8.42 billion (approximately Rs. 60,000 crores). Shares of Microsoft, among the most precious US technology companies, dropped 3 percent in extended trade even though earnings per share slightly beat analysts’ estimates. The stock had closed 3.3 percent greater in a extensive tech rally.

Azure, Microsoft’s flagship cloud product, had revenue growth of 76 percent in the fiscal second quarter ended December 31, down from a 98 per cent spike per year earlier. Azure sales increased 76 percent in the September quarter too.

Long famous for its Windows software, Microsoft has changed its focus into the fledgling cloud market where it’s combating Amazon.com for dominance. The business is quickly picking up business from the retail industry particularly, which will be aiming to keep up with the e-commerce business of Amazon. This month alone, Microsoft announced deals with Walgreens Boots Alliance Inc and Kroger Co, in addition to a five-year agreement with Walmart Inc it unveiled this summer.

“Our strong commercial cloud results reflect our deep and growing partnerships with major companies in every industry including retail, financial services, and health care,” Microsoft Chief Executive Satya Nadella said in a statement.

The Redmond giant has long courted customers outside the United States and contains a 17 percent share of the worldwide cloud marketplace, research firm Canalys formerly said. Amazon has 32 percent. Microsoft is spending more on the most recent cloud technologies to narrow down the gap.

Microsoft’s total revenue climbed 12.3 percent to $32.47 billion (approximately Rs. 2,30,000 crores). Wall Street analysts on average had expected revenue of $32.51 billion, according to IBES data from Refinitiv. However, Wall Street has grown accustomed to blockbuster earnings beats as companies around the world ditch their own data centers for the cloud. “It was not a blowout quarter,” said analyst Shannon Cross of Cross Research. “That’s probably playing a bit into” the stock decrease.

Analysts were expecting $29.9 billion, based on IBES data from Refinitiv. The business also stated a stronger US dollar could hit increase of its intelligent cloud business section, which comprises Azure and other products, by 2 percentage points. Revenues jumped 20 percent for Microsoft’s”intelligent cloud” services, the artificial and business intelligence unit that has become a core for the company.

Earnings from Microsoft’s productivity program unit climbed 13 percent to $10.1 billion, powered by double-digit revenue growth for LinkedIn and Office 365. LinkedIn, the professional social network acquired by Microsoft in 2016, saw a 29 percent jump in earnings and”record levels of involvement.” Wall Street analysts on average had expected revenue of $10.09 billion, according to IBES data from Refinitiv.

Microsoft’s personal computing division, home to Windows applications and its biggest by revenue, showed revenue growth of 7 percent to $13 billion, while analysts had expected $13.07 billion. The device also has Xbox gaming consoles, the Bing online search support and Surface laptops.

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