Microsoft cloud growth beats expectations, lifts shares

Microsoft  reported quarterly profit of $13.2 billion, boosted by a steadily growing cloud computing business that the company says now accounts for almost a third of its total revenue.

Shares traded higher and added to gains in the Dow Industrial Average.

CEO Satya Nadella even said in a call with investors that "our commercial cloud business is the largest in the world," although that's only true if you use Microsoft's unique definition. The company counts its widely-used office software and similar online services as part of its overall cloud business. That's in addition to cloud infrastructure such as data centers and servers, where Amazon is the market leader.

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MSFT MICROSOFT CORP. 409.06 +2.00 +0.49%

Microsoft said it had net income of $1.71 per share in the fiscal fourth quarter. Earnings, adjusted for non-recurring gains, were $1.37 per share.

The results exceeded Wall Street expectations. The average estimate of 14 analysts surveyed by Zacks Investment Research was for earnings of $1.21 per share.

The increase in net income was 49 percent, but was affected by a one-time tax benefit of $2.6 billion from transferring some properties from foreign subsidiaries to the U.S. and Ireland. The software maker also surpassed forecasts by posting revenue of $33.7 billion in the period, a 12 percent increase over the same time last year. Eleven analysts surveyed by Zacks expected $32.7 billion.


The company's fastest-growing segment was what it calls the "intelligent cloud," which includes server products and its Azure cloud computing platform. The segment's revenue was $11.4 billion, up 19 percent from a year ago.

Microsoft said cloud business sales accounted for 30 percent of Microsoft's $125.8 billion in total revenue over the past year, up from 24 percent the previous year.

The Associated Press contributed to this article.