Microsoft Rides High in Q1, Buoyed by the Cloud

By Pedro Hernandez  |  Posted 2014-10-23 Print this article Print
Microsoft cloud

Microsoft beat Wall Street estimates, with a boost from rising demand for the company's business cloud computing offerings and improving consumer sales.

Microsoft's bet on cloud computing continues to benefit the Redmond, Wash.-based software giant's balance sheet.

The company announced today that it generated $23.2 billion in revenue during its fiscal 2015 first quarter, beating Wall Street analyst estimates of $22.02 billion. Net income for the quarter ended Sept. 30 jumped to $4.54 billion, or $0.54 per share, surpassing analyst expectations of $0.49 per share.

By comparison, Microsoft reported revenue of $18.53 billion, net income of $5.24 billion and earnings per share of $0.62 during the same period last year.

Integrating Nokia Devices and Services continues to drag on the company's finances, to the tune of $1.14 billion, or 11 cents a share. This week, Microsoft began removing the Nokia name from marketing and its mobile offerings, despite a 10-year agreement allowing the use of the brand.

Chief Financial Officer Amy Hood noted that strong cloud revenue continues to improve the company's bottom line. "We delivered a strong start to the year, with continued cloud momentum and meaningful progress across our device businesses," she said in a statement.

Office 365, Azure and Dynamics CRM helped commercial cloud revenue rise by 128 percent during the quarter, compared with the same year-ago period, reported Microsoft. During an investor conference call, CEO Satya Nadella said that the first quarter marked the "fifth consecutive quarter of triple-digit growth" for its commercial cloud slate. Commercial Office 365 seats "nearly doubled" during the quarter, added Nadella, before revealing that "more than 60 percent" of Azure customers are using the company's premium Azure services, including Enterprise Mobility Suite.

Demand for Microsoft's server products and services, particularly SQL Server, System Center and Windows Server, helped improve sales by 13 percent. As a sign of improved Windows adoption among enterprises, volume licensing revenue experienced a 10 percent gain.

Nadella, fresh from inking a major cloud deal with IBM and unveiling an expansion of Azure's global footprint, said in a statement that Microsoft is "innovating faster" and "engaging more deeply across the industry" to help drive growth. All told, sales in Microsoft's Commercial segment sales grew by 10 percent to $12.28 billion.

The picture is even brighter on the consumer side. Devices and Consumer sales jumped 47 percent, to reach $10.96 billion in the first quarter.

Users keep flocking to Office 365 Home and Personal, the company's cloud-enabled productivity software offerings, totaling more than 7 million subscribers. The company's business-friendly tablet, the Surface Pro 3, helped Surface revenue reach $908 million.

Windows Phone hardware sales reached $2.6 billion in the first full quarter after the Nokia deal closed. Xbox sales (Xbox 360 and Xbox One) amounted to 2.4 million units during the quarter, a 102 percent improvement. Microsoft expects the $2.5 billion acquisition of Mojang, maker of the popular Minecraft video game, to wrap next month, revealed Nadella during the call.

"Customers are embracing our latest technologies from Surface Pro 3 and Office 365 to Azure and SQL Server," said Microsoft's Chief Operating Officer, Kevin Turner, in a statement.


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