Microsoft Beats Estimates on Cloud Services, Gaming, and Software Growth

Andrew Cummings
July 20, 2018

In the fourth quarter, Microsoft posted net profits of $8.8 billion, a rise of 35 percent over a year ago.

These bumper numbers can largely be credited to the seemingly unstoppable growth of the company's cloud biz, which is up 23 per cent compared to past year. While cloud adoption is growing-Azure revenue was up 89 percent-perpetual-license revenue was also up by 8 percent, showing continued demand for on-premises systems. With a revenue of $30.1 billion (up 17%), you wouldn't blame Microsoft's chief executive officer Satya Nadella for declaring it "an incredible year".

Revenue in the company's More Personal Computing division, which includes its Windows PC business, Surface products and gaming teams jumped 17 percent over previous year to $10.8 billion. Microsoft's gaming revenue has increased by 39%, an increase of $643 million.


In the company's Productivity and Business Processes division, which includes Office 365 and LinkedIn, revenue increased 13 percent over a year ago to $9.7 billion.

Microsoft now has three reporting segments: Productivity and Business Processes (covering Office, Exchange, SharePoint, Skype, and Dynamics), Intelligent Cloud (including Azure, Windows Server, SQL Server, Visual Studio, and Enterprise Services), and More Personal Computing (covering Windows, hardware, and Xbox, as well as search and advertising).

It's that time of the year again, when Microsoft is releasing its earnings report for the fourth quarter of its 2018 fiscal year, or the second quarter of the calendar year.


Revenue at Microsoft's productivity and business processes unit, which includes Office 365, rose 13.1 percent to $9.67 billion, topping analysts' average expectation of $9.65 billion, according to Thomson Reuters I/B/E/S. Xbox software and services revenue increased 36 percent, attributed to third-party titles, and Xbox Live monthly active users stand at 57 million, up 8 percent, year on year.

For the quarter, Microsoft showed strong growth in all three of its major reporting areas - especially in cloud computing, where Wall Street most wants to see growth.

Switching gears to the More Personal Computing category, revenue increased by 17 percent, moving up to $10.8 billion. That groups the company's cloud-computing business Azure, with the subscription cloud-based Office 365 and sales software Dynamics 365.


Microsoft shares today are down 53 cents, or half a percent, at $104.60.

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