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By Aaron Tilley
Microsoft Corp. said continued strength in its cloud-computing business helped deliver strong first-quarter earnings growth.
The technology giant on Wednesday reported earnings of $1.38 a share compared with $1.14 in the year-ago period. Analysts surveyed by FactSet had expected per-share earnings of $1.24. Revenue rose 13.6% to $33.06 billion, beating analysts projections.
Microsoft's sales for its three main product areas in the quarter surpassed its guidance. Each of the segments should report higher sales in the current quarter, Chief Financial Officer Amy Hood told analysts in a conference call.
The Redmond, Wash., company has enjoyed a strong period of higher earnings, in part because of Microsoft Chief Executive Satya Nadella's bet on cloud computing, a model where customers rent computing power instead of buying their own machines.
Revenue for Microsoft's commercial-cloud operations, which include Azure computing services, Office 365 tools and other cloud services, increased 36% to a record $11.6 billion.
Its focus on the cloud has helped turn Microsoft into the third company to hit a $1 trillion valuation. It was the most valuable company in the world before ceding the title back to Apple Inc. this month.
Microsoft has been trying to take market share from Amazon.com Inc., the No. 1 company in cloud computing by sales. To bolster its position, it has made a series of acquisitions to add services to its cloud business. This week, the company announced it was acquiring startup called Mover, which will help businesses migrate data to Office 365.
One of Microsoft's biggest challenges is to sustain its cloud-computing momentum amid concerns that businesses may slow information-technology spending in coming months over concerns of a global economic slowdown. Azure sales growth in the last quarter fell to 59% from 64% in the previous quarter.
Brad Reback, an analyst at Stifel, Nicolaus & Co. said Microsoft earnings were strong "across the board." Though Azure's sales have slowed, Mr. Reback said the company's performance was impressive with Microsoft's growth outpacing that of Amazon's cloud service at a comparable point.
Microsoft's intelligent cloud segment, which includes its Azure product line, booked revenue of $10.85 billion, up 27%, beating analyst expectations of $10.42 billion.
Microsoft's productivity and business process division, which includes LinkedIn, sales-management software Dynamics and commercial subscriptions to the Office 360 product suite, had $11.07 billion in sales, up 13% from the same quarter a year ago. Analysts were expecting sales of $10.85 billion for the quarter.
The company's slower-growing "more personal computing" segment, which includes Xbox gaming equipment, its Surface hardware lineup and Windows licensing fees, reported revenue of $11.13 billion, up 4%, versus analyst estimates of $10.88 billion. Sales of Surface hardware were down 4% from the previous year. With the recent release of new Surface hardware the company expects revenue to be up by a low-double-digit percentage in the current quarter.
Sales of computers featuring the company's Windows 10 software appeared to get a boost as companies transition away from the older Windows 7 suite that Microsoft has said it would stop supporting early next year. Revenue from the Windows Pro segment rose 19%, compared with an 8% increase a year ago.
(END) Dow Jones Newswires
October 23, 2019 19:20 ET (23:20 GMT)
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