Microsoft Beats Estimates on Cloud Services, Gaming, and Software Growth

Microsoft CEO Satya Nadella

"In gaming, we are pursuing our expansive opportunity - from the way games are created and distributed to how they are played and viewed, surpassing $10 billion in revenue this year for the first time", Microsoft CEO Satya Nadella said on a call with investors Thursday.

The More Personal Computing group logged $10.8bn in revenues up 16 per cent from the year-ago quarter. The company reported $30.085 billion in revenue, a 17% increase over the same quarter's $25.605 billion from previous year.

Over the past few years, we've been reporting on how Microsoft's fortunes are now becoming directly tied to the cloud. Microsoft reported that Office commercial products and cloud services revenue increased 10% (up 8% in constant currency) mainly driven by strong Office 365 commercial revenue growth of 38% (up 35% in constant currency).

Intelligent Cloud revenues were $9.6bn, up 20 per cent. Server business revenues were up 24 per cent.

Microsoft hits $100bn in revenue for the first time thanks to cloud, Surface growth

Notably, Azure - considered the leading rival to the dominant Amazon Web Services - saw revenue growth of 89% from the same period in 2017, though Microsoft doesn't disclose specific financials for the service. Dynamics revenue was also up 11 percent.

Net income rose to $8.87 billion, or $1.14 per share, from $8.07 billion, or $1.03 per share, in the year-ago fourth quarter. Once again, the company's earnings showed strength in its cloud business, where it has increasingly thrown its backing in the a year ago.

Intelligent Cloud revenues in 2018 were $32.2bn, a 15 per cent improvement from $27.4bn past year. 'Our early investments in the intelligent cloud and intelligent edge are paying off, and we will continue to expand our reach in large and growing markets with differentiated innovation.

All in all, a familiar tale: cloud services are growing (although Microsoft remains reluctant to offer concrete numbers on Azure), and Microsoft seems to be successfully converting customers away from perpetual licenses and over to Office 365. Windows revenue from PC makers jumped 7 percent, and Surface revenue was up 25 percent, and gaming revenue skyrocketed by 39 percent. Azure is gaining traction and is now sitting at 16% overall cloud market share versus Amazon Web Services which has around 32% based on recent market data. "The combination of Xbox Live, Game Pass subscriptions and Mixer are driving record levels of growth and engagement".

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