Continued Business Cloud Adoption Drives Q3 Growth at Microsoft

Azure, Office 365 and Dynamics help the company beat Wall Street analyst expectations for the quarter.


Microsoft today announced that it generated $6.59 billion in profits during the fiscal 2015 third quarter, or $0.61 per share, beating analyst forecasts by 10 cents. Revenues climbed to $21.7 billion, a 6 percent increase compared with the same year-ago period, surpassing Wall Street estimates of $21 billion.

In what is becoming a familiar theme, cloud computing's growing popularity, particularly among enterprises, is lifting the Redmond, Wash., software giant's fortunes. "Customers continue to choose Microsoft to transform their business and as a result we saw incredible growth across our cloud services this quarter," said Microsoft CEO Satya Nadella in a statement.

According to the company's figures, Azure, Office 365 and the company's cloud-based customer relationship management software, Dynamics CRM Online, helped commercial cloud sales rise by 106 percent last quarter, or 111 percent using constant currency calculations, which disregard currency fluctuations, on a year-over-year basis. Dynamics alone is "nearly a $2 billion business," he said. As a consequence, Microsoft's commercial cloud business now has an annualized revenue run rate of $6.3 billion, "marking the seventh consecutive quarter" of revenue growth, said Nadella during an April 23 investors conference call.

Microsoft's cloud-based Azure Active directory now supports "nearly 50 million monthly active users inside businesses," he added. "More than 5 million organizations are represented in Azure Active directory." Azure cloud storage now holds 50 trillion objects, "three trillion [added] in March alone," said Nadella.

The company's IT infrastructure software offerings also fared well last quarter. Together, sales of premium editions of Windows Server, System Center Server and SQL Server grew 25 percent, reported Microsoft. Server products and services revenue experienced a 12 percent gain. Windows volume licensing to businesses declined 2 percent.

In total, sales at Microsoft's commercial segments, including business licensing, totaled over $12.7 billion. "Around the world we're seeing high interest in deployment of our cloud and server products, as well as participation in the enterprise early adopter program for Windows 10," said Kevin Turner, Microsoft's chief operating officer, in a statement.

Consumers are also flocking to Microsoft's cloud offerings, pushing Office 365 subscriber numbers past 12.4 million, a 35 percent improvement over the previous quarter. Sales of Windows Pro and non-Pro to OEMs dropped 19 percent and 26 percent, respectively.

On the device front, Surface tablet sales jumped 44 percent to $713 million on the strength of the company's laptop-replacing Surface Pro 3 tablet. Last month, Microsoft unveiled the new 4G LTE-enabled Surface 3 tablet, a smaller version of the tablet that runs full Windows like the Surface Pro 3.

Last quarter, Microsoft sold 8.6 million Lumia smartphones, earning the company $1.4 billion in revenue. The acquisition of Nokia Devices and Services, which was officially completed nearly a year ago, continues to weigh on the company's finances, however. The deal cost Microsoft $190 million in integration and restructuring costs, a penalty of 1 cent per share. All told, the Devices and Consumer segment generated $9 billion in sales, an 8 percent year-over-year improvement.

Pedro Hernandez

Pedro Hernandez

Pedro Hernandez is a contributor to eWEEK and the IT Business Edge Network, the network for technology professionals. Previously, he served as a managing editor for the network of...