SUNNIER DAYS AHEAD

The cloud is the brightest thing in Microsoft’s future

Microsoft is finding its home in the cloud, but not quite fast enough for investors.

As revenue from PCs and Windows has fallen as a share of the company’s overall revenue, Microsoft hopes to revive its fortunes by placing a big bet on software and mobile services delivered from the cloud. That’s working, although perhaps not as quickly as Microsoft might like as its stock price took a hit after its earnings call on April 21.

Microsoft’s revenue for its “Intelligent Cloud” segment grew 3% (8% adjusted for currency exchange rates) to $6.1 billion in the latest quarter, slightly lower than analysts’ expectations. Its Azure offering, a competitor to Amazon Web Services that allows businesses to store, compute and deliver data from the cloud, saw a 120% jump in revenue over the previous quarter. It expected to adopt a mix of software subscriptions and “hybrid” licenses to boost revenue from its cloud offerings.

For mobile, the news was mixed: The biggest loser was Microsoft’s phones, which saw a 46% decline in revenue. Revenue from the company’s Surface tablets increased by 61%, driven by Surface Pro 4 and Surface Book, a bright spot for a hardware line that had booked more than a billion dollars in losses in recent years. On the earnings call, Microsoft CFO Amy Hood indicated that phone sales were not expected to increase in the next quarter underlining the company’s underperforming smartphone strategy.

The company overall posted $22.08 billion in revenue for the quarter ending on March 31, up 1.6% percent from the same period last year.

Earnings of 62 cents a share were still off analysts’ expectations of 64 cents a share on $22.09 billion in revenue, according to Thomson Reuters. Hood told Bloomberg that profit would have exceeded analyst estimates if not for tax expenses.

Company shares sank, trading more than 5% lower in after-hours trading.

 

 

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