Windows sales picked up a bit, too, allowing the company to beat sales and earnings estimates.
Double-digit growth in Microsoft’s cloud services and a modestly improving PC business allowed the company to beat Wall Street expectations for the December quarter.
Excluding three weeks of LinkedIn results and adjusting for Windows 10 deferrals and other items, Microsoft posted per-share earnings of 84 cents on revenue of $25.8 billion. On that basis, analysts were expecting earnings of 79 cents per share on revenue of $25.2 billion, according to Zacks.
“We had a really good quarter from our perspective,” investor relations chief Chris Suh told Recode, noting the company posted results ahead of its guidance in each of its three business segments.
The overall cloud business was up 8 percent, or 10 percent if you exclude currency fluctuations. Within that, Microsoft’s Azure business nearly doubled from a year earlier, and the company says its commercial cloud business is now on a $14 billion annual run rate.
The company has set a goal of being at a $20 billion run rate by some time in fiscal 2018 and has relied on this unit for much of its growth in recent quarters.
“It looks like we are tracking well to get there,” Suh said.
The division that includes Windows was down 5 percent, but that was largely due to Microsoft’s continued retreat from the phone business. Excluding phones, Suh said, the “More Personal Computing” unit saw sales increase 2 percent.
The commercial PC business grew in the quarter, while PC sales to consumers remain down, Suh said.
However, he said, the declines are narrowing. “You are starting to see growth in pockets,” he said, pointing to higher-end areas such as gaming PCs and 2-in-1 devices that serve as both laptop and tablet.
In Microsoft’s third business unit, which includes Office and its Office 365 subscription service, Microsoft had $7.4 billion in revenue, up 10 percent. Commercial Office subscription sales were up 47 percent, while the number of consumer subscribers rose to 24.9 million.
As for its recent LinkedIn acquisition, Suh said, “It’s early days,” but said the integration is going well so far.
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Author: Ina Fried
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