Microsoft profit beats expectations on strong cloud demand

Microsoft Corp reported better-than-expected quarterly profit and revenue on Thursday, helped by strong performance in its fast-growing cloud business.

Shares of the world`s largest software company rose as much as 1.5 percent in after-hours trading, after touching a record high of $74.30 during the regular session.

Microsoft said revenue from its cloud unit, which includes the flagship Azure platform and server products, rose about 11 percent to $7.43 billion in the fiscal fourth quarter ended June 30.

Analysts on average had expected revenue of $7.32 billion, according to data and analytics firm FactSet.

Revenue from Azure nearly doubled in the quarter. (http://bit.ly/2oQAzSJ)

The service competes with Amazon.com Inc`s Amazon Web Services as well as offerings from Alphabet Inc`s Google, IBM and Oracle Corp .

Highlighting Azure`s growth were notable increases to Microsoft`s long-term unearned revenue, which rose by more than 61 percent year-to-year. The metric is used to indicate long-term commitments for services and products, said Kim Forrest, vice president and senior equity analyst at Fort Pitt Capital Group, a portfolio management firm.

“This isn`t just a one-quarter wonder,” Forrest said. "Amazon is going to be paying attention to this."

The Redmond, Washington, company has sharpened its focus on the fast-growing cloud computing unit as part of Chief Executive Satya Nadella`s "mobile first, cloud first" strategy to offset weakness in the PC market.

“Across all three segments, cloud is leading the future," said Stephanie Rodriguez, Microsoft`s director of investor relations.

Michael Turits, analyst at Raymond James & Associates, said Azure is smaller than Amazon`s product but that it is growing faster. "I think it is appealing well to existing enterprise customers who might not immediately be drawn to the Amazon platform," he said.

Microsoft`s net income more than doubled to $6.51 billion or 83 cents per share in the quarter, from $3.12 billion or 39 cents per share in the year-earlier period.

Excluding one-time items, Microsoft earned 98 cents per share.

On an adjusted basis, revenue rose 9.1 percent to $24.7 billion.

Analysts on average had expected an adjusted profit of 71 cents per share and revenue of $24.27 billion, according to Thomson Reuters I/B/E/S.

(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)