Microsoft Corp on Wednesday reported quarterly sales and profit that beat Wall Street expectations, driven by the first acceleration of Azure cloud computing revenue growth in eight quarters amid a pitched battle with Amazon.com Inc’s cloud unit.
Microsoft said that Azure, its primary competitor to Amazon’s cloud, grew 62 percent in the fiscal second quarter ended on Dec. 31 last year, down from a 76 percent revenue growth rate the year before, but up from 59 percent in the fiscal first quarter.
Increased consumption of Azure services, which include offerings such as computing power to run applications and data storage services, drove the revenue growth, Microsoft chief financial officer Amy Hood said.
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“We did have good usage, which matters a ton to that number,” Hood told reporters. “The core thing that we focused on — which is consumption growth — was quite good.”
Microsoft said that revenue from its “commercial cloud” — a combination of Azure and the cloud-based versions of software such as Office — reached US$12.5 billion, up from US$9 billion a year earlier.
The commercial cloud gross profit margin — a key measure of cloud profitability that Microsoft has told investors it expects to improve — was 67 percent, up from 62 percent a year earlier.
Microsoft shares rose as much as 4.58 percent to US$175.94 — an all-time high — in after-hours trading.
The company’s revenue and profit for the second quarter were US$36.9 billion and US$1.51 per share respectively, compared with analyst estimates of US$35.7 billion and US$1.32 per share, Institutional Brokers Estimate System data from Refinitiv showed.
Microsoft has focused on hybrid cloud computing — in which a business can use a mix of Microsoft’s data centers and its own — as well as on delivering its longstanding productivity programs such as Office via the cloud.
Microsoft last year had a 22 percent share of the cloud computing infrastructure market, compared with Amazon’s 45 percent and Google’s 5 percent, data from Forrester Research showed.
The company’s Intelligent Cloud unit, which includes Azure, reported that revenue increased 27 percent to US$11.9 billion in the quarter, versus expectations of US$11.4 billion.
For the fiscal third quarter that ends in March, Microsoft forecast revenue with a midpoint of US$11.9 billion for the unit, compared with analyst expectations of US$11.4 billion.
Its Productivity and Business Process unit, which contains the LinkedIn social network, reported US$11.8 billion in revenue, compared with estimates of US$11.4 billion.
Revenue in the unit that contains Windows was US$13.2 billion, compared with estimates of US$12.8 billion.
Microsoft forecast revenue of US$10.75 billion to US$11.15 billion for the unit containing Windows in the fiscal third quarter, a wider-than-normal forecast range that the company said was because of uncertainty surrounding the spread of the coronavirus in China.
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