Microsoft’s cloud-fuelled turnaround persisted in the fiscal fourth quarter, when sales and profit got a boost from customers signing up for more Internet-based storage, processing and Office productivity software.
Profit in the period ended 30 June rose to US$8.87-billion, or $1.14/share, topping the $1.08 average per-share estimate of analysts polled by Bloomberg. Sales climbed 17% to $30.1-billion, Microsoft said on Thursday in a statement, higher than predictions for $29.2-billion. Annual sales also topped $100-billion for the first time in company history.
CEO Satya Nadella has been overseeing steady growth in the company’s Azure and Office 365 cloud businesses. Surveys of customer chief information officers by both Morgan Stanley and Sanford C Bernstein published in the past month show an increase in companies signing up for or planning to use Microsoft’s cloud products.
Revenue from cloud computing platform Azure rose 89% in the quarter, while sales of Web-based Office 365 software to businesses climbed 38%. Microsoft also saw a bump from relative improvements in the corporate PC market, which has been stagnant for years.
“Azure has been hot and Office 365 too,” said Dan Morgan, a senior portfolio manager at Synovus Trust, which owns Microsoft shares. “Microsoft has made huge strides and done wonderful things to turn the company around. They were on a death track with hanging everything on the personal computer.”
Microsoft’s shares rose about 1% in extended trading after the report. They had closed at $104.40 in New York. Stock in the Redmond, Washington-based company rose 8% during the quarter, exceeding the 2.9% increase in the Standard and Poor’s 500 Index. Shares reached new records throughout the period, and have continued to move higher since the quarter’s close.
Commercial cloud sales rose 53% to $6.9-billion, the company said in slides posted on its website. Gross margin for that business widened by 6 percentage points to 58%. Microsoft has been posting improved profitability as it adds customers, enabling it to run services more efficiently and spread costs across more clients. With cloud demand rising, Microsoft has also said it will continue to invest.
During the fourth quarter, the company also agreed to acquire code-sharing website GitHub for $7.5-billion in stock, aimed at accelerating moves into the cloud and artificial intelligence. — Reported by Dina Bass, with assistance from Jeran Wittenstein and Vivian Li, (c) 2018 Bloomberg LP