Microsoft Beats Estimates on Cloud Services, Gaming, and Software Growth

Marco Green
July 20, 2018

Microsoft reported earnings of $1.13 per share on $30.1 billion in revenue, a 17 percent rise over a year ago, beating Wall Street expectations once again.

Its popular Surface laptop-turned-tablet range earned a 25 per cent increase in revenue, which Microsoft attributed to strong performance by its latest editions against low comparable numbers previous year.

"We had an incredible year", chief executive Satya Nadella said in a release. That's a 23% increase from Q4 2017, during which the segment pulled in $7.4 billion, and yet another clear sign that Microsoft's pivot to the cloud is proving ever more prescient.

Intelligent Cloud revenues were $9.6bn, up 20 per cent. Server business revenues were up 24 per cent.

On a conference call with investors, Nadella attributed the strong results in part to a recent reorganization of the company's engineering teams to prioritize cloud computing and artificial intelligence over its legacy software products and Windows operating system. We're investing aggressively in content, community, and cloud services across every end-point to expand usage and deepen engagement with gamers. Microsoft topped $110 billion in revenue for the year, up 14 percent from the year before, passing the $100 billion mark for the first time. The gains were broad based: both commercial and consumer Office revenue were up (10 percent and 8 percent, respectively), with 29 percent growth in commercial Office 365 seats and a total of 31.4 million consumer Office 365 subscriptions.

Analyst Patrick Moorhead at Moor Insights & Strategy said Microsoft's results showed healthy growth.

"The combination of the cloud, which is a megatrend that's going to last for years to come, and the execution, this is company that knows how to sell and be innovative - it's hard to argue with anything here", said Tom Taulli, InvestorPlace.com analyst.

Moves into business services and cloud computing have reduced Microsoft's dependence on Windows, the dominant software for personal computers that has been overtaken in the consumer market by mobile devices powered by Google or Apple software.

"With GitHub we recognise the increasingly vital role the developers play in value creation and growth in the area of the intelligent cloud and intelligent edge", Nadella said.

Other reports by Click Lancashire

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