How Is Microsoft Strengthening Its Cloud Arsenal?

Microsoft (Nasdaq: MSFT) last week announced its third quarter results that blew past all market expectations. Microsoft’s Azure continued to shine and helped boost its Intelligent Cloud revenue. 

Microsoft’s Financials

Microsoft’s Q3 revenues grew 16% over the year to $26.8 billion, ahead of the market’s forecast of $25.77 billion. Adjusted EPS of $0.95 was also ahead of the Street’s expectations of $0.85 for the quarter. Net income increased 35% to $7.4 billion.

Microsoft returned $6.3 billion to shareholders in the form of dividends and share repurchases in the third quarter of fiscal year 2018, an increase of 37%.

By segment, revenues in the Productivity and Business Processes grew 17% to $9 billion above the Street estimate of $9.25 billion. Within the segment, revenue from Office commercial products and cloud services increased 14%, Office consumer products and cloud services increased 12%, and Dynamics increased 17%. LinkedIn revenue increased 37% to over $1.3 billion. Last year, Microsoft integrated Dynamics 365 with LinkedIn to help salespeople deliver better outcomes using insights from LinkedIn Sales Navigator and LinkedIn’s professional network. The solution helps salespeople view LinkedIn information about leads, contacts, accounts, and opportunities directly in the Dynamics CRM.

The Intelligent Cloud segment grew 17% to $7.9 billion, compared with the market’s estimates of $7.68 billion. Server products and cloud services revenue increased 20% driven by 93% growth in Azure revenue and Enterprise Services revenue increased 8%. This is the 11th consecutive quarter of more than 90% revenue growth for Azure. It had reported 93%, 97%, 90%, and 98% growth in the previous four quarters. According to Synergy Research Group, Amazon’s AWS leads the cloud infrastructure market with 34% in 2017, up 0.5% while Microsoft held a 13% share, up 3%.

Revenues from the More Personal Computing segment grew 13% to $9.9 billion above the Street estimate of $9.25 billion. Revenue from Windows OEM grew 4%, Windows commercial grew 21%, Gaming increased 18%, Surface increased 32%, and Search advertising excluding traffic acquisition costs increased 16%.

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Sramana Mitra is the founder of One Million by One Million (1M/1M), a global virtual incubator that aims to help one million entrepreneurs ...

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Kurt Benson 5 months ago Member's comment

#Microsoft is smart to reinvest in the cloud. Competition is fierce but $MSFT has an edge.