Microsoft Earnings Soar Thanks to Booming Cloud Business

microsoftMicrosoft reports its biggest earning yet. It fiscal second-quarter results report a $5 billion in net income, or around 62 cents per share, on a revenue of $23.8 billion.

Analysts explain that this is all thanks to the company’s fast-growing cloud business, which has helped it beat its competition and top expectations.

No Longer the Underdog

Microsoft is widely seen as the underdog of all tech leaders. Not exactly possessing the same “cool factor” that its rivals Google and Apple has, its report comes as a surprise to many analysts, as their numbers continue to top expectations in recent quarters.

Microsoft admits that there was a strong decline in many of its businesses, such as the PC market and its auxiliary devices. What was unexpected, however, was how influential the company’s cloud services is, delivering strong growth throughout the entire quarter.

Server products and cloud services revenue grew about 10 percent on a constant currency basis, while nearly 20 percent of search revenue back in December came from the then recently released Windows 10. Search advertising revenue grew to about 21 percent on a constant currency basis, which in turn strengthened Microsoft’s overall performance for the fiscal second-quarter.

Cloud Success

Nadella
Photo Credits: David Paul Morris/Bloomberg via Getty Images

Chief Executive Officer Satya Nadella’s efforts to transform the software makes seems to be making ground. Nadella has been trying to remake the company around cloud services since late 2014, starting with the Azure computing platform.

The then emerging cloud business was the company’s direct response to Amazon’s Web Services, and it seems to have succeeded. From the same quarter in 2015, Microsoft’s Azure cloud business grew to about 127%, more than double its rival.

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The results, however, are unsurprising. Cloud services are becoming the platform for almost every business, and Microsoft taking advantage of this growing technology was a smart move.

Although Microsoft’s cloud success is arguably the one taking center stage in its reports, the company’s hardware business is also performing well despite the general decline in PC items and associate hardware.

This is due to the company’s Surface line of convertible laptops, which help grow the Microsoft’s revenue by around 29%. Xbox One, the company’s ace in the gaming industry, is also instrumental in its growing revenue, although the company has yet to release the latest figures on their Xbox sales.
In an era of slow growth and stock dips, Microsoft seems poised to wear out the slump in the technological sector. The march of technology is very hard to predict, but with the company’s figures, there’s no doubt that it will remain comfortably at the top.