Microsoft Earnings Soar On Booming Cloud Computing Business

Microsoft this week reported earnings for its fiscal fourth quarter ended June 30, 2017, and what a quarter it was. Non-GAAP revenue came in a healthy $24.7 billion, with earnings per share checking in at 98 cents, beating most estimates. Microsoft's operating income for the past three months was $7 billion, while its profit for the quarter came to $7.7 billion, a large part of which was attributable to Microsoft's cloud business.

"Innovation across our cloud platforms drove strong results this quarter," said Satya Nadella, chief executive officer at Microsoft, "Customers are looking to Microsoft and our thriving partner ecosystem to accelerate their own digital transformations and to unlock new opportunity in this era of intelligent cloud and intelligent edge."

Image Source: Wikimedia Commons (Ben Franske)

Microsoft's Azure cloud computing platform continued to show gains and ended the quarter a 97 percent year-over-year growth rate. This helped drive Microsoft's server products and overall cloud services revenue, which increased 15 percent for the quarter. While Microsoft did not reveal exact revenue for Azure, collectively Microsoft raked in $7.4 billion from its Intelligent Cloud efforts.

Windows OEM revenue rose 1 percent, which is not fantastic but still slightly ahead of the overall PC market. On the hardware side, Microsoft saw a 2 percent decline in Surface revenue. The company attributed the drop in sales to product lifecycle transitions rather than anything to do with the market souring on 2-in-1 devices. Gaming revenue was up 3 percent as strength in Xbox software and services helped offset lower hardware revenue, and Microsoft's search revenue jumped 10 percent (not including traffic acquisition costs). All of this falls under the More Personal Computing category, which decreased 2 percent to $8.8 billion.

Looking ahead, Microsoft anticipates "intense competition" in every market it competes in. The company also expects to post $23.6 billion to $24.3 billion in revenue for the first quarter of its 2018 fiscal year.

Reaction by investors has been mixed. Shares of Microsoft were up 1 percent at about $75 per share in after hours trading, but are now down almost a percentage point to $73.68.