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Betting on a cloud-first product strategy has proven to be a lucrative move for Microsoft.
On Jan. 31, the Redmond, Wash. tech titan reported revenue of $28.9 billion for its second quarter of fiscal year 2018, representing a year-over-increase of 12 percent and beating Wall Street analyst estimates of nearly $28.4 billion. Net income was $7.5 billion and earnings per share of 96 cents surpassed analyst expectations of 86 cents.
Somewhat complicating Microsoft’s rosy financials is a $13.8 billion charge the company said was a result of the recently-passed Tax Cuts and Jobs Act. Taking that charge into account, the company reported a loss per share of 82 cents on a GAAP basis.
Regardless of the tax hit, Microsoft’s cloud remains a big and growing cash cow.
The Intelligent Cloud segment, which consists of Azure, server products and enterprise services, generated sales of $7.8 billion during the quarter. Azure revenue nearly doubled (98 percent) compared to the previous year, and it appears poised to maintain its momentum as more businesses seek out cloud products to power their next-generation IT workloads.
“I expect Microsoft to continue to grow the Azure revenues and expect the majority of enterprises to have at least some Azure deployments in the next one to three years,” said Jack Gold, principal analyst at J. Gold Associates, in email remarks sent to eWEEK.
“With increased use of AI for enterprise workloads (and to compete with Google and others), Microsoft is beefing up Cortana for user interface and back-end AI services running on Azure. I also expect the Azure IoT to help with uptake as companies move into the deployment of IoT.”
Microsoft’s business software ecosystem is also riding high on the cloud.
The Productivity and Business Processes segment, which includes Office, Dynamics and LinkedIn, produced sales of $9 billion, a 10-percent increase. Office 365 commercial revenue jumped 41 percent.
“While many expected to see a migration away from Office as companies moved to the cloud, these numbers show that most companies are sticking with Microsoft for productivity suites, and the move to Office 365 shows a strong trend of moving from on-prem/on-device into the cloud,” Gold said. “I think this will continue to be a growth area for Microsoft.”
Households are also flocking Office 365. The cloud-enabled productivity software’s consumer sales were up 12 percent and it now boasts 29.2 million subscribers, according to company estimates.
LinkedIn, the massive professional network that Microsoft acquired in 2016 for $26 billion, posted revenue of $1.3 billion. Although a relatively small part of the Microsoft pie, the Dynamics 365 suite of ERP and CRM solutions experienced a 67-percent rise in sales, showing “that companies see Microsoft as a viable alternative to Salesforce and Oracle, and even to some extent SAP,” Gold observed.
Finally, the More Personal Computing segment generated sales of $12.2 billion, a two-percent gain. Windows OEM Pro and Non-Pro revenue increased 11 percent and four percent, respectively, while the Windows commercial products and cloud services unit suffered a four-percent decline. Surface sales were essentially flat at nearly $1.34 billion, a one-percent increase.