Microsoft beats earnings forecasts, reaching $20 billion cloud revenue run rate

Janie Parker
October 27, 2017

While the software giant doesn't disclose revenue figures for those businesses, it said its commercial-cloud run-rate - the last month of sales of its Azure and Office 365 products, multiplied by 12 - hit $20.4 billion.

Windows Phone is dead, the company's fitness-focused wristband has been axed and its streaming music service is no more, and Microsoft investors couldn't be happier with the company.

Revenues rose 11.7% from a year ago to $24.5 billion, also topping analysts' view for $23.57 billion.

To support its growing cloud business, Microsoft is doling out huge sums to build expensive data centers around the world.

Microsoft Corporation shares were trading at $78.93 per share on Thursday afternoon, up $0.30 (+0.38%).

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As you can see from the image above, the biggest areas of growth, in terms of percentage, are Azure, Dynamics 365, and Office 365 commercial. The company also said that Azure premium services grew by "triple digits" for the 13th consecutive quarter.

"We have been impressed by solid execution and strong customer adoption of Microsoft's cloud applications and platforms", KeyBanc analyst Brent Bracelin wrote. The Office product line, which consists of internet-based versions of Word, Excel and other workplace productivity software, posted sales growth of 42 percent. Office consumer products increased by 12 percent and Office 365 consumer subscribers increased to 28 million.

Windows consumer revenue increased by 4 percent, which is ahead of the overall personal computer market. Search ad revenue excluding traffic acquisition costs grew 15%, and Surface revenue rose 12% driven by Surface Laptop sales.

Microsoft reported revenue of $24.5 billion for the quarter, up almost 12 percent over the same period a year ago. Operating expenses were $8.6 billion, an increase of 16% (15% in CC) over past year. Industrywide, global PC shipments fell 3.6 percent in the period, according to Gartner Inc.

Notably, however, Google managed to overtake Microsoft both in revenue and profit, generating $6.7 billion in profit on $27.7 billion revenue. Profit for the quarter climbed to $6.6 billion from $5.7 billion in the first quarter previous year.

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