Microsoft profits soar on back of cloud success

Azure stacks up
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Investment in its cloud computing unit has boosted profits at Microsoft. Despite being hit with a $13.8 billion tax charge in the last quarter, Microsoft has beaten profit forecasts set by Wall Street. In total overall revenue climbed 12 per cent to $28.92 billion, beating analysts’ expectations of $28.40 billion.

However, it is Microsoft’s cloud computing business which continues to break all predictions. The last three months represented the 10 consecutive quarter in which revenue growth for its flagship Azure cloud computing service increased by 90 per cent. Revenue from what Microsoft calls its intelligent cloud segment rose 15.3 per cent to $7.8 billion (£5.49 billion) in the company’s fiscal second quarter, including 98 per cent growth for Azure.

Since Chief Executive Satya Nadella took the helm in 2014, Microsoft’s cloud business - which includes products such as Office 365, Dynamic 365 and Azure - has emerged as a major growth area. Amazon Web Service customers hoping to avoid being locked into one service could be helping growth, said Kim Forrest, an equity analyst at Fort Pitt Capital Group. “If you’re really smart you’ll have not one provider but two,” she said.

Amazon Web Services is still leading the way in the cloud computing market, with more than 31 per cent of the market share. However Azure is showing no signs of slowing down and has been growing fast. Currently the second player in the cloud computing market, Azure accounts for around 14 per cent of the market.

Besides Azure, Microsoft’s other businesses also grew. Revenue from its productivity and business unit, which includes the Office 365 service, was up 24.7 per cent to $8.95 billion. Revenue at Microsoft’s personal computing which includes Windows, Xbox and Surface, also rose by 2.36 per cent to $12.17 billion.

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