Microsoft earnings rise on strength of cloud business

Microsoft reported third-quarter financial results Thursday that surpassed analyst expectations, once again rising on strong growth in its cloud products.

Microsoft said revenue from its Azure cloud computing service grew 93 percent during the quarter, a trend that has marked the company’s momentum in the increasingly important market for the last several quarters. That growth slowed just slightly from the fiscal second quarter, when Azure grew by 98 percent.

Revenue in the “commercial cloud” group  — which encompasses Azure, Office 365 and Dynamics 365 — grew 58 percent to $6 billion during the quarter.

Microsoft, which is widely believed to be the second-largest cloud provider behind Amazon Web Services, does not break out specific Azure or Office 365 revenue numbers.

But it did say that it now has 135 million active users of its Office 365 commercial product, up from 120 million users in October. That cloud-based product, which is not tied to one device,  has become an increasing focal point for the company as businesses shift to a mentality of being able to access data anytime, anywhere.

Microsoft’s capital expenditures during the quarter reached $3.5 billion, reflecting an expansion of data centers used to power its cloud, which are now in more than 50 regions around the world.

Overall, the Redmond company reported a profit of $7.4 billion, or 95 cents a share, on revenue of $26.8 billion for the quarter. Analysts were expecting Microsoft to report earnings of 85 cents a share on $25.8 billion in revenue.

Revenue was up more than 15 percent from the same period last year, and profit increased 35 percent.

The company announced a major reorganization at its headquarters late last month, which put an even stronger focus on the cloud while de-emphasizing its long-standing Windows operating system business.

But the stalwart Windows is still a steady driver for the company. Microsoft’s “more personal computing” group — which includes Windows, gaming and Surface — reported the largest share of revenue with $9.9 billion, a 13 percent increase from last year.

Gaming revenue was up 18 percent during the quarter, something CEO Satya Nadella attributed to third-party game developers building successful games for the Xbox. The company’s newest version of its gaming console debuted last winter, with a higher price tag but the promise of more power.

Microsoft’s other big hardware business, its Surface tablets, posted a 32 percent gain in revenue during the quarter.

Microsoft’s stock closed up more than 2 percent at $94.26  in Thursday’s regular trading session. After the company’s earnings conference call with analysts, the stock rose 2.2 percent to $96.30 in after-hours trading.