Microsoft Cloud Push Gains Ground on Azure, Office 365

The company, however, has long said that it wanted its cloud services to reach an annual run rate of $20 billion by the end of its 2018 fiscal year. Bolstering these results were the rapid growth of Microsoft's cloud services.

Following the Microsoft FQ1 2018 earnings release, the company's stock surged in after-hours trades, climbing by as much as 2.51% to $80.74.

Profit in the period that ended September 30 exceeded analysts' estimates and sales rose 12 percent to $24.5 billion amid buoyant demand for Azure cloud services, used to store and run customers' applications in Microsoft's data centers.

The technology giant's net income rose to $6.58 billion, or 84 cents per share, in the first quarter ended September 30, from $5.67 billion, or 72 cents per share, a year earlier.

"This quarter we exceeded $20 billion in commercial cloud ARR, outpacing the goal we set just over two years ago", said Satya Nadella, chief executive officer at Microsoft. LinkedIn revenue of $1.1 billion for the quarter was flat sequentially.

Productivity and Business Processes: This segment, which includes results from Office and Office 365 (commercial and consumer customers), grew 28 percent to $8.2 billion. Microsoft's Office division brought in a nice 10% YoY growth stat while the company's Dynamic Products and Cloud Services sector saw their own 13% increase for the quarter.

Wall Street was expecting Microsoft to report first quarter earnings of 72 cents a share on revenue of $23.56 billion. The rise in subscription sales for Azure and for corporate and consumer versions of Office 365 also provides more stable and recurring revenue.

As for Windows, revenue from companies putting Pro versions of the operating system on devices was up by 4 percent. Xbox software and services jumped up 21 percent overall to make up for losses in hardware sales.

Gaming revenue was down 1 percent, as Microsoft prepares for the launch of the Xbox One X console on November 7.

  • Joey Payne