Microsoft tops estimates as Azure, Office products drive gains

Microsoft Corp on Thursday topped Wall Street forecasts for quarterly profit as the technology company signed up more businesses to its Azure cloud computing services and Office 365 productivity suite.

Much of Microsoft’s recent growth has been fueled by its cloud computing business as more enterprises seek to cut data storage costs by adopting cloud-based software and moving their applications to data centers.

The company’s flagship cloud product Azure, which competes with Amazon.com Inc’s dominant cloud infrastructure offering Amazon Web Services (AWS), recorded revenue growth of 93 per cent in the third quarter ended March 31.

“Microsoft on the heels of Azure is gaining further steam in this massive secular cloud shift, and the results speak to that,” said Daniel Ives at research firm GBH Insights.

Azure’s growth has propelled Microsoft to the No. 2 position in the US$15.6 billion cloud computing market with a 14 per cent share, behind AWS’s 32 per cent, research firm Canalys estimated in February.

Microsoft shares, which are up almost 40 per cent over the past year, rose slightly after closing 2.1 per cent higher at US$94.26.

Revenue at Microsoft’s productivity and business processes unit, which includes Office 365, rose 17 per cent to US$9 billion, topping analysts’ average expectation of US$8.73 billion, according to Thomson Reuters I/B/E/S.

Revenue for Microsoft’s More Personal Computing unit rose 13 per cent to US$9.9 billion, including a 32 per cent increase for its Surface business.

Kristin Chester, senior finance manager of Microsoft investor relations, said the growth was “better than expected” and stemmed from the business’s evolving product portfolio.

Microsoft “refocused its efforts and catered to a productivity audience with a Surface that is both a tablet and a PC,” said Rebecca Wettemann, an analyst with Nucleas Research. “Apple is still playing catch up to that.”

Overall, the Redmond, Washington-based software maker’s revenue rose 16 per cent to US$26.82 billion, ahead of expectations of US$25.77 billion.

Net income rose to US$7.42 billion, or 95 cents per share, from US$5.49 billion or 70 cents per share, in the year-ago quarter. Analysts had expected earnings of 85 cents per share.