Microsoft posts growth in cloud services, drop in phones

Azure, Microsoft's cloud service, sees 93% increase in revenue

The Dollar Business Bureau

Microsoft released its FY 2017 second quarter results on January 26, 2017. It reported total revenues of $24.1 billion, up 1% year on year. The net income ($5.2 billion) has seen an increase of 4% year on year and earnings per share have increased to $0.66, up 6.4% from the previous year.

Microsoft has its operations divided broadly into 'Productivity and Business Processes', 'Intelligent Cloud' and 'More Personal Computing'. The 'Productivity and Business Processes' segment showed 10% increase in revenue, amounting to $7.4 billion. Revenue in 'Intelligent Cloud' was $6.9 billion, up 8%, majorly driven by a 93% rise in revenue from Azure. 'More Personal Computing' saw a 5% drop in revenue, which stood at $11.8 billion. The fall is attributed primarily to sluggish phone sales.

Growth of cloud computing has been a major driver of revenue and profits. Azure and Office 365, two cloud based offerings made by Microsoft, have been attracting a growing customer base. As the number of users expanded exponentially, Microsoft reaped returns on its investment in data centres and infrastructure for cloud based services. Office 365 commercial alone grew 47% in revenue according to Q2 2017 results. The company is bullish on growth in its cloud business, as it expects to hit $20 billion mark in revenues in this segment by FY 2018.

Microsoft CEO, Satya Nadella, expressing his vision for the future, said that innovation and advancement in artificial intelligence (AI) will boost growth of Microsoft cloud. Speaking about the results, he said that they affirmed Microsoft's new direction in AI and cloud computing.

Microsoft's recent acquisition, LinkedIn, added $228 million in revenues but cost the company $100 in net income. Any judgement on Microsoft's move to take over LinkedIn based on these results may be premature, as the acquisition took place towards the end of the quarter, closing on December 8, 2016. Next quarter results may shed more light on the social network's performance as a subsidiary of Microsoft

The Dollar Business Bureau - Jan 27, 2017 12:00 IST