Cloud-computing growth drives Microsoft quarterly earnings beat

Commercial Cloud revenue run-rate was just under $19B, almost $2B in phone-related losses helped, too.

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Microsoft reported better-than-expected fiscal Q4 earnings and revenues yesterday on the strength of its cloud business. It was a strong affirmation of the choice of Satya Nadella as CEO and his big bet on the cloud.

Overall revenues were $24.7 billion, and net income was $7.7 billion (non-GAAP). Earnings per share were $0.98. Revenues grew 9 percent, and earnings were up more than 40 percent.

Wall Street analysts had expected earnings of $0.71 and revenues of $24.2 billion. However, the big earnings beat was due in large part to use of losses from a write-down of Microsoft’s Windows Phone business:

The tax rates reflect a $1.8 billion impact related to the utilization of prior years’ losses from Microsoft’s phone business that were not deductible in the years incurred. As a result of this tax item, earnings per share for the quarter increased by $0.23.

That doesn’t diminish the fact that Microsoft’s cloud business is growing fast and performing well and growing faster than rival Amazon’s cloud business.

GAAP vs. Non-GAAP Financials

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Source: Microsoft fiscal Q4 financial presentation

Microsoft said its Commercial Cloud “annualized revenue run rate” was just under $19 billion. There was also strong growth for the company’s Office 365 subscription businesses (enterprise and consumer). The company reported 27 million Office 365 consumer subscribers vs. 23.1 million a year ago.

Personal computing revenue was $8.8 billion, down 2 percent on lower mobile hardware revenue. (Microsoft’s mobile phone hardware business is effectively dead.). However, its Windows OEM revenue was up 1 percent, “slightly ahead of the overall PC market,” which is flat to declining. Surface revenue was down 2 percent. 

The company said that search-related revenue grew 10 percent on higher revenue per search and overall query volume. As of June, Bing had a 23 percent share of the US search market according to comScore.

Microsoft recently laid off 3,000 mostly sales-related employees as part of its transition to focus on its cloud computing business.


Opinions expressed in this article are those of the guest author and not necessarily MarTech. Staff authors are listed here.


About the author

Greg Sterling
Contributor
Greg Sterling is a Contributing Editor to Search Engine Land, a member of the programming team for SMX events and the VP, Market Insights at Uberall.

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