Microsoft Corp. (MSFT) shares rise to record levels after exceeding earnings estimates.
The tech giant reported a more-than-double quarterly earnings, with net income rising to $6.51 billion, or 83 cents per share, for the fourth quarter ending June 30, compared to $3.12 billion, or 39 cents per share, during the previous year.
The company claim adjusted earnings of 98 cents per share, which surpassed analysts’ expectations of 71 cents per share. Revenue rose 13 percent year over year to $24.7 billion, against Wall Street’s projected revenue of $24.3 billion.
The upsurge is credited to the continued success of Microsoft’s cloud business unit. Sales for the company’s Intelligent Cloud unit, which is composed of Windows Server product and the Azure cloud services—a platform that lets companies store and run their business applications in Microsoft data centers—rose 11 percent year-over-year to $7.4 billion, against estimates of $7.3 billion analyst consensus. For the quarter, Azure revenues rose 97 percent year-over-year.
Microsoft CEO Satya Nadella is transitioning the 42-year-old company towards becoming a cloud computing powerhouse, where it will face tougher competition in the form of Amazon’s Amazon Web Services (AWS) and Alphabet Inc.’s Google Cloud. Despite the competition, Microsoft is proving to be a formidable player by scaling up and quickly growing its reach.
According to a report by The Street, several large enterprises are favoring Azure over other competing cloud products, and analysts are also projecting that Microsoft’s cloud products may overtake AWS this year. Meanwhile, demand for Microsoft’s Office 365 and Windows 10 remain steady.
“Innovation across our cloud platforms drove strong results this quarter,” Nadella said in the earnings release. “Customers are looking to Microsoft and our thriving partner ecosystem to accelerate their own digital transformations and to unlock new opportunity in the era of intelligent cloud and intelligent edge.”
The shift to cloud productivity led to a major salesforce restructuring in the company earlier this month. Thousands of sales and marketing jobs were cut to give more attention to selling cloud and other newer products like artificial intelligence and data analytics.
“They are a company that seems to be ahead of some of these old-line technology companies that are making transitions to the cloud,” Dan Morgan, senior portfolio manager at Synovus Trust, which owns Microsoft shares, said in a report from Bloomberg. “The story is still intact but they have a ways to go.”
Revenue for the company’s Productivity and Business Processes units, which includes Office 365 and LinkedIn, also jumped 21 percent year-over-year. Revenue of professional networking site LinkedIn is $1.1 billion compared to third quarter’s generated revenue of $975 million. The company acquired LinkedIn for $26.2 billion in 2016, which is also Microsoft’s largest deal so far.
Revenue of Office 365 also exceeded that of traditional version of Office installed in PC and laptops. Microsoft has been shifting from selling traditionally installed and downloadable versions to subscription-based online software, and the revenue surge is an important fete as it means that the company’s subscription services bet is paying off. Office Commercial revenue, which includes both Office 365 and the traditional Office, grew 5 percent year-over-year to $277 million, Fortune reports. Sales of the company’s Office Consumer segment is at $99 million, an increase of 13 percent year-over-year, which the company said was also due to the growing subscription base for Office 365.
“We’re taking that learning of the past 18 months and really applying it at a broader scale across the salesforce—to put those resources where we feel confident that they’ll have a good long-term return in that next phase of transformation,” Amy Hood, chief financial officer of Microsoft, told Fortune.
Microsoft shares has grown almost 20 percent so far in 2017.