Microsoft Corp. on Thursday reported better-than-expected
adjusted earnings and revenue for its latest quarter, as strength in its cloud
business continued to drive growth. Shares rose 6.2% to $55.30 a share in
after-hours trading. Microsoft, like many mature tech companies, has been
struggling to grow. The software maker is focusing on its cloud-services
segment, which includes services like Azure and was recently broken out into a
new reporting segment. In the fiscal second quarter, revenue for Microsoft’s
“Intelligent Cloud” segment rose 5% to $6.34 billion. On a constant-currency
basis, revenue grew 11% but slowed from the 14% growth it posted in the first
Microsoft revenue for Azure, its cloud-computing platform,
surged 140% excluding currency impacts, while server products and cloud
services revenues were up 10%. That comes as Microsoft’s best-known
business—software for personal computers—continued to weaken. That segment,
which also includes its Xbox videogame consoles and popular Surface Pro, posted
a 2% decline in revenue excluding currency impacts. The segment was hurt by
lower Windows revenue and the company’s decision to scale back its smartphone
business, offset in part by a 29% increase in Surface revenue.
Operations Chief Kevin Turner said Microsoft experienced a
“strong holiday season,” citing growth at Xbox and Surface, which recently
launched the Surface Pro 4 and Surface Book. In all for the period ended Dec.
31, Microsoft reported a profit of $5 billion, or 62 cents a share, down from
$5.86 billion, or 71 cents a share, a year earlier.
Excluding the impact of revenue deferrals and restructuring
charges, adjusted earnings rose to 78 cents from 70 cents a year earlier. Revenue
fell 10% to $23.8 billion, or $25.69 billion on an adjusted basis. Analysts
polled by Thomson Reuters had expected adjusted per-share profit of 71 cents
and revenue of $25.26 billion. Revenue in Microsoft’s productivity and business
processes unit, which includes Office commercial products, rose 5% on a
constant-currency basis. Microsoft cited higher Office 365 and dynamics
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