MSFT Microsoft Corporation

By Jay Greene 

Once written off as a technology has-been, Microsoft Corp. continued its rebirth as a force in cloud-computing, posting double-digit increases in its business selling web-based services to corporate customers.

The venerable software giant has solidified its spot as the No. 2 provider of on-demand computing processing and storage behind market pioneer Amazon.com Inc. In its fiscal fourth quarter, Microsoft notched gains in its Azure cloud-computing business and Office 365, the online version of its widely used productivity software.

Revenue from the Redmond, Wash., company's Intelligent Cloud segment, which includes Azure, rose 11% to $7.4 billion. In the Productivity and Business Processes segment, which includes the Office franchise, revenue climbed 21% to $8.4 billion.

Microsoft doesn't disclose revenue figures for its Azure and Office 365 businesses, but it said Azure revenue jumped 97% and Office 365 revenue rose 43%.

Overall, Microsoft posted $6.51 billion in fourth-quarter net income, or 83 cents a share, compared with a profit of $3.12 billion, or 39 cents a share, a year ago. Excluding the impact of revenue deferrals and other items, adjusted earnings climbed to 98 cents from 69 cents a year earlier.

Revenue rose 13% to $23.32 billion and was $24.7 billion when adjusted to reflect Windows 10 revenue deferrals.

Analysts surveyed by S&P Global Market Intelligence expected Microsoft to report adjusted per-share earnings of 71 cents on $24.29 billion in adjusted revenue.

Shares rose 1.5% to $75 in after-hours trading after results beat expectations. The software giant's shares closed at a record on Thursday, after setting its previous high a day earlier.

The strides Microsoft has made in the cloud come as its legacy Windows operating-system business shrinks. Revenue in its More Personal Computing segment, which includes Windows as well as the mobile-phone and gaming businesses, slid 2% to $8.8 billion. Last week, International Data Corp. reported world-wide PC shipments fell 3.3% in the second quarter, while Gartner Inc. estimated the drop at 4.3%.

Revenue for Microsoft's Surface line of computers also fell 2%. Three months ago, that business was hit hard, registering a 26% revenue decline, which the company attributed to older Surface computers in the market, as well as increased price competition.

Since then, Microsoft has introduced a new Surface laptop for the education market and an update to its Surface Pro tablet-laptop hybrid device, though those products made their debut with just a few weeks left in the quarter.

LinkedIn Corp., the professional social network Microsoft acquired last December for $27 billion, added $1.07 billion in revenue and posted a $361 million operating loss. Microsoft is working to connect its business products to LinkedIn, giving sales representatives using its Dynamics software, for example, tools to easily mine the professional social network to prospect for leads.

Like its cloud rivals Amazon and Alphabet Inc.'s Google, Microsoft is spending lavishly to build giant and expensive data centers around the world to deliver its cloud services. In the quarter, Microsoft spent $3.3 billion on capital expenses, with much of that money going toward its data center expansion. A year ago, Microsoft had $3.1 billion in capital expenses.

Write to Jay Greene at Jay.Greene@wsj.com

(END) Dow Jones Newswires

July 20, 2017 17:14 ET (21:14 GMT)

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