Microsoft's earnings beat expectations as cloud business booms

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The Windows maker posted earnings of $1.14 per share on $30.1 billion of revenue.

The More Personal Computing group logged $10.8bn in revenues up 16 per cent from the year-ago quarter.

For the fourth quarter that ended on June 30, the tech giant reported revenue of $30.1 billion and net income of $8.9 billion.

But more important, "we expect strength in MSFT's Commercial Cloud business, supported by a favorable Enterprise IT spending cycle", writes Zelnick. 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). Microsoft spent $14.73 billion on research and development in fiscal 2018. The revenue grew 8% (up 6% in CC) and the total Office 365 consumer subscribers have reached 31.4 million. The service grew 89%, according to Microsoft, sequentially from the previous quarter. Dynamics revenue was also up 11 percent. Even if the latter is true, several of Microsoft's E3 2018 announcements all but outlined the company's plan to evolve the Xbox platform into something more platform agnostic, starting with its software and services.

Microsoft saw revenue gains across its full range of businesses including business services, gaming, Internet search ads, its consumer software including Windows and Office, and LinkedIn, the recently acquired professional social network. But Xbox is part of larger gaming ambitions at Microsoft that also include its PC hardware business, Windows 10 and other important parts of the company. Despite the Surface line being a billion dollar business for the company, it's typically boarding on stagnate or declining revenue for Microsoft on the whole.

CEO Satya Nadella said the company's investments in cloud and edge computing were paying off as Microsoft topped $100 billion in revenue for the year.

Other standouts include revenue from LinkedIn, up 37% from the same time past year, and gaming revenue, up 39%, with Xbox software and services up 36%. The revenue brought in by Surface products was up 25%, and gaming had a healthy 39% increase.

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.

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