Microsoft reported better than expected quarterly profit as more businesses turn to Azure cloud computing services and Office 365 productivity suite.
For the quarter ended March 31, 2018, Microsoft reported the folowing figures, as compared to the corresponding period of last fiscal year:
- Revenue was $26.8 billion and increased 16%
- Operating income was $8.3 billion and increased 23%
- Net income was $7.4 billion and increased 35%
- Diluted earnings per share was $0.95 and increased 36%
"Our results this quarter reflect the trust people and organizations are placing in the Microsoft Cloud," said Satya Nadella, chief executive officer of Microsoft. "We are innovating across key growth categories of infrastructure, AI, productivity, and business applications to deliver differentiated value to customers."
"With consistent investment and strong sales execution, this quarter we achieved better than expected performance across all segments," said Amy Hood, executive vice president and chief financial officer at Microsoft. "We delivered double-digit revenue and operating income growth driven by 58% growth in our commercial cloud revenue."
The company's cloud product Azure, which competes with Amazon.com's dominant cloud infrastructure offering Amazon Web Services (AWS), recorded revenue growth of 93 percent in the three months ended March 31.
Azure's growth has propelled Microsoft to the No. 2 position in the $15.6 billion cloud computing market with a 14 percent share, behind AWS, which holds a 32 percent slice of the market, research firm Canalys estimated in February.
Revenue at Microsoft's productivity and business processes unit, which includes Office 365, rose 17 percent to $9 billion.
Windows OEM revenue increased 4% (up 4% in constant currency) driven by OEM Pro revenue growth of 11%.
Microsoft also reported surprise increases in LinkedIn and Surface revenue.
While Surface didn't make any big revenue gains in the previous holiday quarter, it's up 32 percent year-over-year in this latest quarter. Although the company hasn't launched any new Surface products in 2018, a Surface Notepad has been rumored to be arriving this year.
In addition, Microsoft's Xbox software and services revenue has grown 24 percent, and overall Xbox Live active users hit 59 million this quarter. That's the same as the recent holiday quarter, but it's an increase of 13 percent year-over-year.
LinkedIn has now been included in Microsoft's earnings reports for a full year now, and the social network was responsible for $1.3 billion of revenue this quarter. That's a 37 percent increase from the same period last year.
Finally, search advertising revenue excluding traffic acquisition costs increased 16% (up 14% in constant currency) driven by higher revenue per search and search volume.