Microsoft’s aggressive focus on ‘Cloud’ helps it notch up better-than-estimated Q1’17 earnings

Microsoft today released its earnings report for the first fiscal quarter of 2017, and they’re mostly flat when compared to analyst estimates. But, one cannot rule out the fact that under the guidance of CEO Satya Nadella, Microsoft is now transitioning away from being just about Windows. This quarter has seen stunning growth in company’s cloud strategies including Azure, Office and other enterprise-related business products.

The Redmond giant reports non-GAAP earnings-per-share of 76 cents on revenue of $22.3 billion, while analysts predicted an EPS of 68 cents on revenues of $21.71 billion. The quarterly report from this year is almost identical to previous year, where Microsoft reported an EPS of 67 cents on revenue of $21.7 billion. The company also reports a non-GAAP net income of $6 billion in its first quarter of 2017.

We are helping to lead a profound digital transformation for customers, infusing intelligence across all of our platforms and experiences. We continue to innovate, grow engagement, and build our total addressable market,

says Satya Nadella, CEO at Microsoft in a statement.

Here’s a brief comparision between growth number in the current fiscal year as compared to the previous one. Though the company is steadily moving towards a cloud-first approach, these figures point out that Microsoft is still growing on the back of its Windows deferrals. This is still one of the core components of its software division, and is expected to receive two major ‘Redstone’ updates in the coming year.

The revenue and income numbers are fairly constant and one might think that Microsoft is not showing growth even after all these years, but that’s not the case. Satya Nadella has repeatedly said that he is looking to boost the company on the cloud-computing front and make Azure one of its prominent offerings. The company has recently also been battling to save its dwindling hardware division, a part of which has already been sold off.

Thus, Office and Cloud are forerunners in the latest quarterly earnings report of 2017. The revenue in productivity and business processes, which includes Office and CRM services grew 6 per cent to $6.7 billion this quarter. This includes 51 per cent commercial revenue growth of Office 365 services, whose subscriber count surged to a hefty 24 million. The dynamics and cloud services revenue also grew 11 per cent.

On the other hand, Azure peaked the charts and showed tremendous growth this fiscal quarter. As compared to the previous quarter, overall revenue of intelligent cloud services rose 8 per cent to amount to $6.4 billion. This was led by the 116 per cent growth in Azure revenues, which is growing aggressively to compete against the beefier AWS. The enterprise segment revenue also increased 1 per cent with growth in premium support services.

To address the elepahnt in the room, Windows OEM and commercial products revenue was flat year-over-year. The personal computing division suffered and reported a 2 per cent decline in revenues. The phone business revenues also declined 72 per cent. The company expects to close the sale of its entry-level phone business to FIH Global and HMD by the next fiscal quarter, thus reducing the drag it is adding to these reports.

The $26.2 billion LinkedIn acquisition, on the other hand, still hasn’t been finalised but shows no signs of damage to the earnings report. Microsoft expects the transaction to receive regulatory approval and start adding to the balance sheet by the end of next fiscal quarter.

Due to a stable revenue numbers backed by exceptional growth of its cloud services, stock prices of MSFT rose about 3 per cent in after-hours trading. The shares prices have peaked above its previous all-time high of $59.97 in 1999, now trading at $60.63.