Microsoft gets a boost from Windows as the cloud stays on track

(Reuters) – Microsoft Corp beat Wall Street estimates for quarterly profit and sales on Wednesday, driven by a surprise boost in Windows sales and the growth of its cloud business remained on the job.

FILE PHOTO: The Microsoft character is displayed at the top of the Microsoft Theatre in Los Angeles, California, USA, October 19,2018. REUTERS/Mike Blake

Shares rose 3.2% after the call, the impressions of the Redmond, Washington-based company has a market capitalisation of almost $1 trillion. The rally added to the inventory is approximately 23% of the earnings so far this year, after hitting a record high of $125.85 during the regular opening hours.

Under Chief Executive Satya Nadella, the company has, for the past five years, a shift from the reliance on the once-dominant Windows operating system to selling cloud-based services.

Azure, Microsoft’s flagship cloud product competes with market leader’s Amazon Web Services (AWS) for computing power to companies.

Growth in that unit slowed down to 73% from 76% in the second quarter. Mike Spencer, Microsoft’s head of investor relations, said the decline was roughly in line with the estimate as cloud business begins to mature after a number of years of rapid growth.

Microsoft’s earnings per share of $1.14 beat expectations of $1 according to the IBES data of Refinitiv.

Windows license revenue from computer makers grew by 9% compared to the previous year, beating expectations, after a 5% decline in the previous quarter. Spencer said a shortage of Intel Corp processor chips for Pc’s that many analysts had expected that the latest in this summer was resolved earlier than expected, allowing PC manufacturers to ship more machines.

Microsoft’s “commercial cloud” revenue, including business use Azure, Office 365, and LinkedIn – was $9.6 billion in this quarter, an increase of 41% on the previous year, but a slight decline from the 48% growth of the previous quarter.

Microsoft’s so-called “intelligent cloud” unit, which contains the Azure services, posted a turnover of € 9.65 billion, above Wall Street estimates of $9.28 billion, according to the IBES data of Refinitiv. “The productivity of the business processes and the” unit both in the Office and also the social network LinkedIn had $10.2 billion in revenue versus expectations of $10.05 billion.

Microsoft’s results on Thursday included two weak spots.

The gaming revenue amounted to just 5% versus 8% in the quarter, which Spencer attributed to less income from third-party game developers, and the fact that a lot of gamers are delaying the purchase of the xBox because a new model is expected soon.

The sales of the company’s Surface hardware also grew in only 21% versus 39% in the quarter, again driven by customers with updates for hardware they expect will be released soon.

The total turnover rose 14% to $30.57 billion in the third quarter ended March 31, beating analysts ‘ average estimate of $29.84 billion, according to the IBES data of Refinitiv.

The net profit rose to $8.81 billion, or $1.15 per share, from $7.42 billion, or 96 cents per share, a year earlier.

Reporting by Sayanti Chakraborty in Bengaluru and Stephen nellis in San Francisco; Editing by Sriraj Kalluvila and Richard Chang

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