Nadella’s Microsoft Delivers Stellar Cloud Numbers

Microsoft (Nasdaq: MSFT) recently announced its first quarter results and the performance blew past all market expectations. Microsoft continued to deliver stellar growth in the Cloud segment, instilling additional confidence in the market. Post the result announcement, its stock climbed to record high-levels, once again.

Microsoft’s Financials

Microsoft’s Q1 revenues grew 12% over the year to $24.5 billion, ahead of the market’s forecast of $23.56 billion. EPS of $0.84 was also ahead of the Street’s expectations of $0.72 for the quarter.

By segment, revenue from Productivity and Business Processes grew 28% over the year to $8.2 billion driven by a 10% increase in Office commercial products and cloud services revenue and a significant 42% growth in Office 365 commercial revenue. Office consumer products and cloud services revenue increased 12% and Office 365 consumer subscribers increased to 28 million. Dynamics products and cloud services revenue increased 13% driven by Dynamics 365 revenue growth of 69%. LinkedIn accounted for $1.1 billion in revenues for the quarter.

Revenue from the Intelligent Cloud segment grew 14% to $6.9 billion as Server products and cloud services revenue increased 17% driven by Azure revenue growth of 90%. Enterprise Services revenue increased 1% due to growth in Premier Support Services.

Revenue from the More Personal Computing segment was flat at $9.4 billion despite the 4% increase in Windows OEM revenue and 7% increase in Windows commercial products and cloud services revenue. Search advertising revenue excluding traffic acquisition costs increased 15%, Surface revenue increased 12% while Gaming revenue increased a modest 1%.

For the current quarter, Microsoft projected revenues of $28.2 billion, ahead of analyst forecast of $28.1 billion. The company forecast EPS of $0.84, ahead of the Street’s forecast of $0.83 for the quarter.

Microsoft’s Cloud Growth

Once again, Microsoft’s stellar performance was attributed to its Cloud focus. Its commercial cloud annualized revenue run rate is $20.4 billion, one year ahead from its target set in 2015 by its leader Satya Nadella. Here is an interesting infographic, courtesy Motley Fool, that showcases this stellar performance.