Microsoft's Cloud Buoys Earnings

By Jay Greene 

Microsoft Corp.'s cloud business is growing fast enough to offset stalling revenue from its Windows workhorse.

The software giant's posted solid gains in its Office 365 and Azure cloud-computing service in fiscal first quarter, even as Windows revenue growth was flat. That helped the company easily top Wall Street's adjusted earnings and revenue expectations.

Shares rose 5.2% to $60.20 in recent after-hours trading.

Revenue at the Redmond, Wash., software giant's intelligent cloud segment, which includes its Azure on-demand computing services, rose 8% to $6.4 billion, or 10% when adjusted for currency fluctuations. The productivity and business processes segment, which includes Microsoft's Office franchise, sales climbed 6% to $6.7 billion. In constant currency, revenue grew 8%.

Windows revenue from computer makers was flat in the quarter. That's better than the world-wide PC market as a whole, which slid 3.9% in the quarter that ended in September, according to International Data Corp. For the quarter, revenue from the more personal computing segment, which includes Windows, as well as Microsoft's mobile phone and gaming businesses, fell 2% to $9.3 billion, or a 1% decline in constant currency.

Gaming revenue fell 5% from the year-ago period, driven by lower revenue from sales of Xbox consoles. The figure includes sales of the Xbox console, Xbox Live subscriptions and transactions, as well as game and accessory sales.

Over all, Microsoft posted $4.69 billion in first-quarter net income, or 60 cents a share, compared with a $4.9 billion profit, or 61 cents a share, a year ago.

Excluding the impact of revenue deferrals and restructuring charges, adjusted earnings were 76 cents. Revenue rose 0.4% to $20.45 billion and was $22.33 billion on an adjusted basis.

Analysts surveyed by Thomson Reuters expected Microsoft to report adjusted earnings per share of 68 cents on sales of $21.7 billion.

Write to Jay Greene at [e-mail]

(END) Dow Jones Newswires

October 20, 2016 16:42 ET (20:42 GMT)

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