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Satya Nadella
Microsoft CEO Satya Nadella at the 2017 GeekWire Summit. (Photo by Dan DeLong for GeekWire)

Microsoft exceeded Wall Street expectations again in the most recent quarter, buoyed by its cloud division.

Microsoft reported earnings per share of 95 cents on $26.8 billion in revenue — up 16 percent over last year — with net profits of 7.4 billion for the third quarter of its fiscal year that ends in June. Analysts surveyed in advance by Yahoo Finance expected earnings of 85 cents per share on $25.77 million in revenue.

“Our results this quarter reflect the trust people and organizations are placing in the Microsoft Cloud,” Microsoft CEO Satya Nadella said in a statement. “We are innovating across key growth categories of infrastructure, AI, productivity, and business applications to deliver differentiated value to customers.”

Microsoft stock, which has been hovering close to the $100 per share mark for much of 2018, is down slightly following the company’s latest financials.

  • In the company’s Productivity and Business Processes division, which includes Office 365 and LinkedIn, revenue rose 17 percent over last year to $9 billion but was nearly flat compared to last quarter. Office 365 now has 135 monthly active users. LinkedIn revenue grew 37 percent to $1.3 billion, and the company took an operating loss of $246 million, down from $375 million a year ago.
  • Intelligent Cloud revenue was up 17 percent to $7.9 billion, with Microsoft citing factors including a 93 percent increase in Azure cloud revenue.
  • Revenue in the company’s More Personal Computing division, which includes its Windows PC business, Surface products and gaming teams rose 13 percent $9.9 billion for the quarter. Surface revenue grew 32 percent to $1.1 billion. Gaming revenue hit $2.2 billion, an increase of 18 percent, powered by Xbox software and service revenue.

The biggest story of the quarter was the reorganization of the company’s engineering divisions. The changes put more resources behind the company’s cloud and artificial intelligence groups, while somewhat de-emphasizing Windows. The reorganization also included the departure of Terry Myerson, a 21-year Microsoft veteran, led the Windows and Devices Group as executive vice president through the launch of Windows 10 and the rollout of Surface devices.

Microsoft continued its work in AI with several breakthroughs. Microsoft researchers built the first machine they claim can translate parts of news stories from Chinese to English as well as humans can. Microsoft teamed up with University of Pittsburgh Medical Center to build an artificial intelligence platform that can assist doctors by listening in and learning from their conversations with patients.

In March, Microsoft completed what it called “the single largest corporate purchase of solar energy ever in the United States,” buying 315 megawatts from two new solar projects in Virginia as part of its ongoing effort to power its global data centers with renewable energy. Microsoft says it has reached its goal of powering at least 50 percent of its data centers with clean energy by this year. The company says the latest deal will help achieve its next goal, powering 60 percent of its data centers with clean energy by 2020.

In its bread-and-butter area of enterprise software, the chat application Teams hit its one-year anniversary in March. Microsoft said at the time Teams was used by 200,000 organizations in 181 markets around the world, up four-fold from its 2017 launch. Microsoft has steadily released new features for the program, including integration with the digital assistant Cortana and the ability to import more third-party content.

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