Microsoft shares are staying flat in after-hours trading after reporting its quarterly earnings, which beat Wall Street expectations.
The star of the show was Microsoft’s cloud computing business, which continued to post strong gains even as its traditional Windows and Office businesses show signs of struggle.
Earnings per share of $0.84 on an adjusted basis, versus $0.79 expected. Revenue of $25.8 billion. That figure excludes Windows 10 revenue deferrals and results from the just-acquired LinkedIn, making it a clean beat on the $25.28 billion expected by Wall Street analysts.
Investors were especially looking to see growth in the company’s crucial cloud computing businesses, as the Microsoft Azure cloud continues to gain ground on the leading $10 billion Amazon Web Services juggernaut. That’s important, as the company’s revenue from traditional businesses like Windows and Office continues to stagnate.
And they got it: Revenue from its Productivity and Business Processes unit, which includes the fast-growing Office 365 cloud productivity suite, was up 10% from the same period in 2015 to $7.4 billion. While Office 365 revenue was up 47% from the quarter previous, boxed Office software revenue was down 13%. Microsoft says this is a sign of people abandoning traditional Office for the internet-delivered model of Office 365.
Notably, LinkedIn contributed $228 million of revenue to the Productivity unit in the three weeks between the acquisition closing and the end of the quarter.
Meanwhile, the Intelligent Cloud unit got an 8% boost over the last quarter, largely thanks to an 93% increase in Microsoft Azure revenue from the same period in the previous year. A drag on this unit was the enterprise services business, which dipped 4% over the previous quarter. A good news for investors is that Microsoft was able to report that usage of Azure was doubled over the same period in 2015.
Finally, the worst news came out of the More Personal Computing unit, which dipped 5% from the same quarter in the previous year to $11.8 billion – not encouraging given that this report covers the holiday quarter. While Microsoft says that its business of licensing Windows to PC manufacturers was up 5%, the revenue from the Xbox-driven gaming business was down 3%.
When Microsoft last reported earnings in October 2016, the strength of its cloud business propelled the company’s stock to an all-time high.
We’ll be covering the results as they cross the wire. So refresh this page or click here for more updates.