Skip to main content

Microsoft is expanding its operations in Vancouver.

LUCY NICHOLSON/REUTERS

Microsoft Corp.'s fiscal fourth-quarter profit and sales topped analysts' estimates, buoyed by an aggressive push into Internet-based software and services for businesses.

Key Points

Including some adjustments, revenue was $22.6-billion, compared with the average analyst estimate for $22.1-billion, according to data compiled by Bloomberg.

Story continues below advertisement

Revenue from Azure, the company's corporate cloud platform, doubled in the quarter ended June 30.

Profit, excluding certain items, was 69 cents a share, Microsoft said Tuesday in a statement. Analysts on average had forecast profit of 58 cents.

During the quarter, Microsoft recorded total charges of $1.11-billion, related to the restructuring of the phone business it acquired from Nokia and job cuts.

Shares rose as much as 4.4 per cent in extended trading after closing at $53.09 in New York.

The Big Picture

Chief Executive Officer Satya Nadella has been reorienting Microsoft's business around cloud and productivity services to fuel growth as traditional software sales shrink. Annualized revenue from commercial cloud products was more than $12.1-billion in the recent quarter, a number that Microsoft has pledged will reach $20-billion by fiscal 2018. The company is relying on a shift to recurring cloud agreements to help make up for weaker one-time corporate software purchases, which are still on course to decline but came in stronger than the company projected in the recent quarter.

CFO Interview

Story continues below advertisement

Microsoft continues to see the trend of businesses moving to the cloud and subscription-based software and services, Chief Financial Officer Amy Hood said via telephone. Transactional purchases of legacy products were "a little better this quarter," she said.

"There's a structural trend and shift to the cloud," she said. In traditional products, "quarter to quarter, you see some volatility in the results."

"The PC market was a little better than we had expected three months ago," she said. "We saw it more specifically in more developed markets."

The Detail Corporate versions of the Office 365 cloud-based productivity software saw revenue increase by 54 per cent, the Redmond, Washington-based company said.

Net income was $3.12-billion, or 39 cents a share, including the Nokia-related charges, compared with a loss of $3.2-billion a year earlier.

Revenue in the Intelligent

Story continues below advertisement

Cloud division rose 6.6 per cent to $6.71-billion, compared with the $6.58-billion average estimate of analysts polled by Bloomberg.

Productivity group sales gained 4.6 per cent to $6.97-billion. Analysts had projected $6.64-billion.

More Personal

Computing division sales, which include Windows and Xbox, fell 3.7 per cent to $8.9-billion, slightly better than the $8.87-billion average analyst estimate.

Unearned revenue, a measure of future sales, was $33.9-billion. Five analysts polled by Bloomberg expected an average of $30.88-billion.

Microsoft's profit was boosted this quarter by a more favorable tax rate. Minus the effects of that gain, profit would have been 63 cents a share, according to a research note from UBS Group AG analyst Brent Thill.

Story continues below advertisement

Microsoft in June agreed to buy professional networking service LinkedIn Corp. for $26.2-billion.

Street Takeaways

"What's comforting is the key underlying trends are in place," said Sid Parakh, a fund manager at Becker Capital Management, which owns Microsoft stock. "At least the long-term trajectory is intact here. There was concern last quarter."

"Deferred revenue growth was pretty decent," Parakh said.

Report an error
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies