Microsoft up in the clouds on first-quarter earnings beat

Microsoft CEO Satya Nadella at the Geek Wire Summit

Microsoft CEO Satya Nadella at the Geek Wire Summit

Overall in Q1, Microsoft, based in Redmond, Wash., saw GAAP revenue of $23.6 billion, and earnings of $0.73 a share.

Shares in the company, which reported its results after the closing bell Thursday, inched up by nearly 4% to about $81.75 in after-hours trading.

The biggest contribution to this fruitful increase is given by the cloud business, as it brought $6.9 billion of the entire earnings. Collectively, Office commercial and consumer revenue grew 10% and 12%, respectively, solidifying our view that the Office transition will allow Microsoft to capture greater lifetime customer value (and ultimately greater total revenue) out of the franchise.

Microsoft reported a strong set of a results for its fiscal first quarter to September. At the same time, as new data centers come online and become more efficient, Microsoft has been making progress in increasing the profitability of these services, with commercial cloud gross margin widening to 57 percent. Revenue in Microsoft's More Personal Computing segment, which includes Windows as well as the mobile-phone and gaming businesses, stayed flat at about $9.4 billion. It is a market where Microsoft competes with Inc., among others, and one in which the company has placed growing emphasis. Surface Laptop has put up the business to 1 billion. Microsoft reported revenue of $24.5 million and 84 cents a share, compared to $22.33 billion and 76 cents a share in the same period the previous year.Like Amazon, Google and Intel, which also released earnings Thursday, its cloud services are hot. "Then lift, shift turns to lift, shift and modernize", Nadella said.

Chief Executive Officer Satya Nadella has turned Microsoft into a cloud-computing powerhouse, recently reshuffling the sales force and investing in new products and services.

For its fourth quarter, a major one that includes the holiday shopping season, Amazon predicts net sales of $56 billion to $60.5 billion. A year ago, Microsoft recorded $2.3 billion in capital expenses. Microsoft expects to post revenue of between $27.8 billion and $28.6 billion for its fiscal second quarter.

The Intelligent Cloud segment, which holds Microsoft's Infrastructure as a Service product, Azure, grew 14% during the quarter, the segment's third double-digit growth performance after Microsoft realigned its segments two years ago.

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