Microsoft rebounded from a rare revenue miss, sailing past Wall Street expectations for its third quarter, powered by the tech giant’s fast-growing cloud computing operations.
Revenue: Microsoft reported $30.6 billion in revenue, up 14 percent over a year ago, growing at a faster clip than analysts expected. Analysts surveyed in advance by Yahoo Finance expected the tech giant to post $29.84 billion in revenue, up 12 percent over the prior year.
Profit: Net income was $8.8 billion for the quarter — or $1.14 per share, ahead of analyst expectations of $1 per share — up 19 percent over a year ago.
Microsoft stock is up 3 percent in after hours trading.
Microsoft splits the company into three main areas in its earnings reports. Here’s how each one did in the quarter ending in March:
- In the company’s Productivity and Business Processes division, which includes Office 365 and LinkedIn, revenue increased 14 percent over last year to $10.2 billion.
- Intelligent Cloud revenue was up 22 percent to $9.7 billion, powered by 73 percent annual revenue growth from Azure.
- Revenue in the company’s More Personal Computing division, which includes its Windows PC business, Surface products and gaming teams jumped 8 percent over last year to $10.7 billion. Last quarter, a surprising 2 percent year-over-year decline in Windows OEM — the money Microsoft brings in from selling Windows to computer makers — contributed to the company’s revenue miss. This quarter, Windows OEM revenue rose 9 percent over the prior year.
The Surface division followed up a huge holiday season with 21 percent annual revenue growth in the most recent quarter, bringing it to $1.33 billion.
Microsoft unveiled versions of the most popular Surface tablets and computers as well as the surprising new Surface Headphones at an event in October. Reveal events in the fall, ahead of the holiday shopping season have become a trend among most big companies, and it appears to have paid off for Microsoft this time around.
Revenue growth has slowed in the last few quarters, going from percentages in the upper 30s to high 20s. Microsoft says it is seeing record levels of engagement on the platform.
The number of Xbox Live users jumped from 59 million a year ago to 63 million in the most recent quarter. Xbox software and services revenue increased 12 percent, offsetting what the company called “lower hardware revenue,” without disclosing specific figures.
- The cloud division continued to pile up partnerships with retailers to battle mutual rival Amazon. This quarter, Microsoft and Kroger unveiled a series of new pilot stores featuring smart shelves with digital displays that update prices dynamically and show personalized icons to help shoppers find items they’ve put on their shopping lists.
- Microsoft’s security teams stayed busy in its long-standing battle against hackers. In March, the company seized 99 websites from a group associated with Iranian hackers.
- Work on the tech giant’s massive campus refresh in its hometown of Redmond, Wash. continued as workers began to knock down the iconic Microsoft “X-Wing” structures — Buildings 1 through 6 and 8 through 10, and a few others.
- Microsoft made the largest pledge for a social cause in its history in January: A $500 million commitment to support affordable housing development in the Seattle area. The pledge includes $475 million for loans to affordable housing developers over three years and another $25 million to services for low-income and homeless residents.
- HoloLens took center stage during the quarter with the unveiling of the next-generation version of the “mixed reality” headset. That came as the company dealt with internal strife over a controversial $480 million contract to supply the U.S. Army with 100,000 HoloLens devices.