Microsoft’s Fiscal Q3 Boosted by Growth in Cloud Computing

Microsoft enjoyed a strong fiscal Q3, ending March 31, with revenue rising 14 percent from a year earlier to $30.57 billion, due largely to a 41 percent growth in cloud computing (now almost one-third of its sales) and a 9 percent uptick in sales of its Windows operating system to PC makers. A 5 percent decline of Windows sales in the previous quarter was due to a dearth of Intel computer chips, depressing PC sales. Chief financial officer Amy Hood said Microsoft also saw “unexpected good performance” in Japan.

The Wall Street Journal reports that Hood “predicted the company would record double-digit revenue growth again in its next fiscal year,” and Microsoft stock rose more than four percent in after-hours trading following news of the results, hitting a record closing high of $125.44 a day earlier.

Since Satya Nadella took the reins of the company in February 2014, “its shares have soared by about 2.5 times” and its market value is now more than $960 billion,” making it “the most-valuable U.S. company for much of this year.” This month, Apple again “regained that crown.” WSJ notes that Nadella has pushed cloud computing, with Azure as its “biggest driver” enabling Microsoft to compete with Amazon and “offer cloud services in tandem with online versions of software.”

According to Microsoft, Azure revenue skyrocketed 73 percent in the latest period from a year earlier. According to Stifel Nicolaus & Co. analyst Brad Reback, Microsoft’s Azure made “about $3.25 billion for the quarter.” FactSet’s survey of analysts revealed, “Microsoft’s results for the latest quarter beat estimates of $29.88 billion for revenue,” with profit rising “nearly 19 percent to $8.81 billion, or $1.14 a share, beating estimates of $1.00 a share.”

Office 365 word-processing and other productivity tools increased by 30 percent in the same quarter, “as many customers move from buying software licenses to subscribing to applications in the cloud,” and that division “grew 14 percent to $10.2 billion in revenue in the third quarter.” Microsoft’s More Personal Computing division, which includes Windows, the Xbox gaming-console business, Microsoft Surface devices and the Bing search engine, grew “by a more modest 8 percent in the quarter to $10.7 billion in revenue.”

Related:
Microsoft Hits $1 Trillion Market Value for First Time, The Wall Street Journal, 4/25/19