Microsoft beats Wall Street expectations on strong cloud performance

Microsoft posted better than expected quarterly profit on Thursday on the back of strong cloud performance. While the Wall Street was expecting the company to report revenue of $23.56 billion and earnings per share of $0.72, the actual reported figures stood at $24.5 billion in GAAP revenue and $0.84 in non-GAAP earnings per share.

As expected, Microsoft’s cloud business - which includes products such as Office 365, Dynamic 365 and the flagship Azure computing platform - was the star performer driving growth. Revenue from Microsoft’s intelligent cloud business rose nearly 14 percent to $6.92 billion in Microsoft’s fiscal first quarter, ended September 30.

Revenue from Azure, which competes with Amazon Web Services grew 90 percent compared to a 97 percent growth rate in the preceding quarter. Additionally, Microsoft said its commercial cloud annualized revenue run rate reached $20.4 billion in the quarter. In 2015, Nadella set a target of $20 billion in cloud revenue by 2018.

“This quarter we exceeded $20 billion in commercial cloud ARR, outpacing the goal we set just over two years ago,” said Satya Nadella, chief executive officer at Microsoft. “Our results reflect accelerating innovation and increased usage and engagement across our businesses as customers continue to choose Microsoft to help them transform.”

Fortunately, Microsoft’s other business units are also raking in moolah for the company. The Redmond-based company reported revenue of $8.2 billion, up 28 percent for the Productivity and Business Processes category, which includes the Office productivity suite, Dynamics, LinkedIn and other products. If we specifically talk about LinkedIn, number of LinkedIn sessions is up 20 percent generating a revenue of $1.1 billion, same as previous quarter.

Revenue from Microsoft’s personal computing division that includes Windows software, Xbox gaming consoles, online search advertising and Surface personal computers, its largest by revenue, fell 0.2 percent to $9.38 billion.

After two consecutive quarters of declining Surface revenue, Microsoft posted a 12 percent year-over-year increase in revenue for its tablets and laptops in the latest quarter, helped by the release of a new Surface in May.

Shares of the company rose 3.1 percent to $81.20 in trading after the bell.