Microsoft sales beat expectations as cloud growth slows

(Reuters) – Microsoft Corp (MSFT.O) beat analysts’ estimates for fourth-quarter income and revenue on Thursday, even as sales growth started to gradual for its cloud product Azure and Office software program.

Since Chief Executive Satya Nadella took over in 2014, Microsoft has been shifting away from its Windows working system software program and towards cloud providers, wherein prospects transfer their computing work to knowledge facilities managed by Microsoft. The firm’s market worth has practically quadrupled since Nadella turned CEO, and Microsoft has averted a lot of the regulatory and antitrust scrutiny centered on different massive tech corporations Alphabet Inc (GOOGL.O), Apple Inc (AAPL.O) and Facebook Inc (FB.O).

Revenue growth in Azure was 64% within the reported quarter, in contrast with 89% a yr earlier and 73% within the prior quarter. Microsoft doesn’t present an absolute income determine for Azure, mixing it into its “intelligent cloud unit,” which had income of $11.four billion in contrast with analyst expectations of $11.zero billion, based on Refinitiv knowledge.

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Shares of Microsoft rose 1.2% to $138.13 in prolonged buying and selling.

Cloud growth powered Microsoft’s market worth previous $1 trillion for the primary time in April. On Thursday, Microsoft’s Azure-based enterprise phase for the primary time ever reported barely extra quarterly income than its Windows-based phase.

In the cloud computing enterprise, Azure’s chief rival is Amazon Web Services, which dominates the trade with a 32.8% market share, based on analysis agency Canalys. Microsoft has a share of 14.6%, whereas Google has 9.9%. The firm can be competing in opposition to Amazon.com Inc (AMZN.O) for a $10 billion contract with the U.S. Department of Defense.

Microsoft has additionally gained floor up to now yr by bundling its Azure computing service for builders together with Office and different software program merchandise for finish customers, such as within the greater than $2 billion cloud deal it signed with AT&T Inc (T.N) earlier this week.

“The pressure was obviously on but they executed,” stated Hal Eddins, chief economist for Microsoft shareholder Capital Investment Counsel. “The cloud is such a key driver of growth for them and they seem to have painted a big bullseye on the back of AWS.”

Revenue in Microsoft’s productiveness software program unit jumped 14.3% to $11.05 billion, powered by double-digit income growth for LinkedIn and Office 365. Analysts on common had anticipated income of $10.71 billion, based on IBES knowledge from Refinitiv.

Meanwhile, its private computing division, residence to Windows software program, rose to $11.Three billion, in contrast with analyst estimates of $10.98 billion. The unit additionally consists of Xbox gaming consoles, the Bing on-line search service and Surface laptops.

Microsoft’s web earnings rose to $13.19 billion or $1.71…