Microsoft’s results beat analysts estimates, based on strong cloud growth

Microsoft beat Wall Street estimates for revenue and profit in its first quarter today, as more businesses signed up for its Azure cloud computing services and Office 365 software. The company’s shares, up more than 21% over the past 12 months, rose 2.5% in after-hours trading.

“We are off to a great start in fiscal 2019, a result of our innovation and the trust customers are placing in us to power their digital transformation,” said Satya Nadella, Microsoft’s chief executive. “We’re excited to help our customers build the digital capability they need to thrive and grow, with a business model that is fundamentally aligned to their success.”

Much of Microsoft’s recent growth has been fueled by its cloud computing business, which has benefited from companies rushing to shift their workloads to the cloud to cut data storage and software costs.

Azure has an 18% share of the global cloud infrastructure market, making it the second-biggest provider of cloud services after Amazon Web Services, according to April estimates by research firm Canalys.

However, the company’s flagship cloud product recorded slower growth from the previous quarter. Revenue growth in the first quarter ended September was 76%, down from 89% in the fourth quarter. Microsoft’s focus on fast-growing cloud applications and platforms is helping it beat slowing demand for personal computers that has hurt sales of its Windows operating system.

Revenue from Microsoft’s personal computing division, its largest by revenue, rose 14.6% percent to $10.75bn. That figure beat the analyst estimate of $10.13bn.

The unit includes Windows software, Xbox gaming consoles, online search advertising and Surface personal computers. Revenue at its productivity and business processes unit, which includes Office 365, rose 18.6% to $9.77bn, topping analysts’ average expectation of $9.40bn, according to Refinitiv data.

Overall, the company’s revenue rose to $29.08bn from $24.54bn, which was above analysts’ average estimate of $27.90bn, according to Refinitiv.