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Enterprise Cloud

Microsoft Posts 19% Revenue Growth

Microsoft’s stock has been rising in recent years and its fiscal first-quarter results reflect why investors are bullish on the company. Microsoft reported a profit of $8.8 billion, or $1.14 a share, on revenue of $29.1 billion (analysts were expecting 96 cents a share and $27.9 billion). Revenue grew 19% during the quarter, compared to 14% for all of fiscal 2018. All of Microsoft’s core products saw double-digit revenue growth during the quarter, and Windows sales to businesses jumped 12% compared to last year. 

In an earnings call, CEO Satya Nadella attributed the results to Microsoft’s focus on selling both cloud services and products that run in customers’ data centers. But it’s not easy to figure out which part of the business is driving the growth, given how Microsoft lumps together various businesses in its segment reporting. In particular, it is tough to gauge the performance of Azure–now its most important business after a reorganization in March–versus cloud market leader Amazon Web Services. Azure sales grew 76% during the quarter, a growth rate that was down for the third straight quarter. But Microsoft’s Commercial Cloud segment, of which Azure is a part, saw sales jump 47% to $8.5 billion. That number was boosted by the addition of LinkedIn’s subscription-based products that are sold to businesses.

Microsoft is the clear No. 2 company in the cloud market, but mixing in revenue from sales of cloud applications and other services shows that it is playing a different game to AWS. That said, Microsoft’s results also show that the company’s decision to pivot its traditional software business to the cloud a decade ago was a smart move. 

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