Microsoft's cloud growth pleases Wall Street
Push to get automakers, retailers and others onto its cloud platform powered strong 3rd quarter earnings
Microsoft's ongoing push to get automakers, retailers and other businesses onto its cloud computing platform helped power the company's third-quarter earnings ahead of Wall Street expectations Wednesday.
The software maker posted fiscal third-quarter earnings of $8.8 billion US, up 19 per cent from the same period last year. The Redmond, Washington-based company said it had profit of $1.14 per share, beating the $1 per share anticipated by analysts.
Microsoft also topped forecasts with $30.6 billion in reported revenue, a year-over-year increase of 14 per cent. Eleven analysts surveyed by Zacks had expected $29.8 billion.
Amid a decline in its legacy Windows software business, much of Microsoft's growth in recent years has come from selling its cloud services to other businesses and governments.
Microsoft Chief Financial Officer Amy Hood said in a statement Wednesday that revenue from the company's "commercial cloud" segment grew 41 per cent year-over-year to $9.6 billion.
ExxonMobil announced in February a deal to tap into Microsoft's cloud platform and artificial intelligence to capitalize on the shale oil boom in Texas and New Mexico.
Vying for military contract and gamer dollars
Microsoft is battling Amazon for a multi-billion dollar contract to supply the U.S. military with cloud computing services. The Pentagon could award the contract as early as this summer. Microsoft has already won a smaller $480 million contract to build HoloLens augmented reality headsets for soldiers.
In the gaming sector, Microsoft said Wednesday that revenue from its Xbox division grew 5 per cent, with 12 per cent growth in software and services offsetting a decline in hardware sales. The company is preparing to launch its first diskless console next month as it braces for increasing competition from new forms of gaming, such as a Google's console-free game streaming service due out later this year.
Microsoft shares have risen 23 per cent since the beginning of the year, while the Standard & Poor's 500 index has risen 17 per cent. In the final minutes of trading on Wednesday, shares hit $125.07, an increase of 34 per cent in the last 12 months.
Microsoft said Wednesday it returned $7.4 billion in the quarter to shareholders in the form of share repurchases and dividends.