Cloud remains strong for Microsoft in second quarter earnings

Doug Carpenter
February 2, 2018

Speaking of Cloud, the revenue was $7.8 billion and increased 15% with main highlights being an increase in revenue of Server products and cloud services by 18% and Enterprise Services by 5%. The 56 percent year-over-year growth in commercial cloud revenue - with broad-based growth across geographic markets and industry segments - is fueled by customer and partner success. This could be partially attributed to Microsoft switching to a subscription model for software like Office 365, which now has 29.2 million subscribers locked in. That marked the tenth straight quarter of Microsoft reporting that Azure revenue grew 90 percent or more on a year-over-year basis. Profit also increased from $3.6 billion to $4.3 billion.

Shares of Microsoft (MSFT) are up $1.38, or 1.4%, at $94.12, in advance of the company's fiscal second-quarter report today, after the closing bell.

In its Productivity and Business Processes segment - which includes Office, Dynamics and LinkedIn - Microsoft experienced a 25% growth as it raked in revenue of $8.95 billion, ahead of the $8.86 billion that FactSet projected.


This figure beat expectations of $28.4 billion and Microsoft posted a quarterly profit of $7.5 billion.

For the last three months of 2017, the company booked a $13.8 billion charge linked to the USA tax reforms passed at the end of past year.

Dynamics products and cloud services revenue grew 10% driven by Dynamics 365 revenue growth of 67%.


Windows commercial products and cloud services revenue declined 4% due to the impact of an apparent larger deal the company made past year. Analysts and investors following Microsoft have wondered if Azure's growth would begin to trail off as the overall revenue number gets larger.

"Microsoft continues to be a pillar of strength on the cloud front, and the Azure growth story is still in the early innings", says Daniel Ives, chief strategy officer at GBH Insights.

Microsoft's biggest revenue generator of the quarter was once again its Windows, Xbox and PC businesses, a group it calls "more personal computing". Microsoft said it returned $5.0 billion to shareholders in the form of share repurchases and dividends during the quarter. The launch of a new Xbox console saw gaming revenue up eight per cent.


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