Microsoft tops estimates as Azure, Office products drive gains
By Salvador Rodriguez and Laharee Chatterjee
(Reuters) - Microsoft Corp (NASDAQ: MSFT) on Thursday topped Wall Street forecasts for quarterly profit as the technology company signed up more businesses to its Azure cloud computing services and Office 365 productivity suite.
Much of Microsoft's recent growth has been fueled by its cloud computing business as more enterprises seek to cut data storage costs by adopting cloud-based software and moving their applications to data centers.
The company's flagship cloud product Azure, which competes with Amazon.com Inc's (NASDAQ: AMZN) dominant cloud infrastructure offering Amazon Web Services (AWS), recorded revenue growth of 93 percent in the third quarter ended March 31.
"Microsoft on the heels of Azure is gaining further steam in this massive secular cloud shift, and the results speak to that," said Daniel Ives at research firm GBH Insights.
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's 32 percent, research firm Canalys estimated in February.
Microsoft shares, which are up almost 40 percent over the past year, rose slightly after closing 2.1 percent higher at $94.26.
Revenue at Microsoft's productivity and business processes unit, which includes Office 365, rose 17 percent to $9 billion, topping analysts' average expectation of $8.73 billion, according to Thomson Reuters I/B/E/S.
Revenue for Microsoft's More Personal Computing unit rose 13 percent to $9.9 billion, including a 32 percent increase for its Surface business.
Kristin Chester, senior finance manager of Microsoft investor relations, said the growth was "better than expected" and stemmed from the business's evolving product portfolio.
Microsoft "refocused its efforts and catered to a productivity audience with a Surface that is both a tablet and a PC," said Rebecca Wettemann, an analyst with Nucleas Research. "Apple is still playing catch up to that."
Overall, the Redmond, Washington-based software maker's revenue rose 16 percent to $26.82 billion, ahead of expectations of $25.77 billion.
Net income rose to $7.42 billion, or 95 cents per share, from $5.49 billion or 70 cents per share, in the year-ago quarter. Analysts had expected earnings of 85 cents per share.
(Reporting by Salvador Rodriguez in San Francisco and Laharee Chatterjee in Bengaluru; Editing by Sai Sachin Ravikumar and Richard Chang)