Arthur J. Villasanta – Fourth Estate Contributor
Redmond, WA, United States (4E) – Microsoft Corporation reported upbeat earnings for the fiscal second quarter ended December 31, 2017 with revenues rising 12% to $28.9 billion and operating income improving by 10% to $8.7 billion.
Microsoft’s numbers in the quarter showed growth in nearly all its businesses, with the most impressive coming from its Azure cloud services, which grew 98%.
Revenues for its biggest business segment (More Personal Computing) that includes Windows, devices, gaming and search advertising grew two percent to $12.17 billion for the quarter. Gaming revenue was up eight percent, mostly due to the new availability of Microsoft’s Xbox One X gaming console.
The Productivity and Business Processes segment (including Office, Dynamics and LinkedIn) rose by 25 percent, with revenues of $8.95 billion. The Intelligent Cloud business, which groups Azure, Windows Server and SQL Server, accounted for revenues of $7.80 billion, and grew 15 percent.
Microsoft again didn’t specify how much revenues Azure accounted for, but did say Azure’s revenue was up by 98 percent in the quarter while compute usage more than doubled. Microsoft’s Azure public cloud took market share away from market leader, Amazon Web Services (AWS). AWS grew 42% to $4.6 billion in the third quarter of 2017.
Microsoft also saw growth in cloud-based versions of software such as Office 365 (up 41%) and Dynamics 365 (up 67%). Dynamics 365 is an enterprise resource planning and customer relationship management tool.
Both are part of Microsoft’s productivity and business processes, whose revenues for the quarter rose 25% to $9.0 billion. This unit also includes LinkedIn, the popular business- and employment-oriented social networking service. LinkedIn contributed revenues of $1.3 billion, with sessions growth of more than 20% for the fifth consecutive quarter.
Despite the better-than-expected earnings for its fiscal second quarter, Microsoft emerged from the quarter with a net loss due to a $13.8 billion charge associated with changes to the U.S. tax code.
“Our results this quarter speak to us picking the right secular trends and markets and following that up with focused innovation and execution,” said CEO Satya Nadella. “The intelligent cloud and intelligent edge paradigm is fast becoming a reality.”
Amy Hood, executive vice president and chief financial officer, said the company “delivered another strong quarter with commercial cloud revenue growing 56% year-over-year to $5.3 billion. Strong execution from our sales teams and partners is driving growth across our businesses.”
Microsoft expects to have $25.5 billion to $25.95 billion in revenue in its fiscal third quarter.
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