SAN FRANCISCO — Microsoft kicked off its new fiscal year with results Thursday that signal a continuing momentum toward a cloud- and mobile-first future for the storied tech company.
The Redmond, Wash-based software pioneer reported adjusted earnings per share of 67 cents against revenue of $21.7 billion, which beat Wall Street estimates of 58 cents and $20.9 billion, according to analysts polled by Thomson Reuters. Net income edged 2% higher to $4.6 billion, or 57 cents a share.
The company’s stock MSFT jumped nearly 7% in after-hours trading to $51.
Microsoft announced it was gaining traction with its new Windows 10 operating system, which is now running on 110 million devices. Commercial cloud annualized revenue run rate now exceeds $8.2 billion. Key business drivers in the quarter include the company’s server and Azure cloud services, which rose 8% to $5.9 billion, as well as productivity and businesses processes (namely its Office suite), which contributed $6 billion. While sales of Windows operating systems declined 17%, they still accounted for $9.4 billion last quarter.
Since CEO Satya Nadella took over for Steve Ballmer in February 2014, Microsoft stock has risen from $35 and hit a post-1990s high of $50 a year ago. It closed up 1.7% at $48.03.
During the quarter, Microsoft announced a 16% increase in its quarterly dividend to $0.36 and returned $6.9 billion to shareholders in the form of share repurchases and dividends.
Bloomberg Intelligence’s Paul Sweeney reports on tech earnings. He speaks on “What’d You Miss?”
“We are making strong progress across each of our three ambitions by delivering innovation people love,” Nadella said in a statement. “Customer excitement for new devices, Windows 10, Office 365 and Azure is increasing as we bring together the best Microsoft experiences to empower people to achieve more.”
“This was strong,” says Daniel Ives of FBR Capital Markets. “There was some fear heading into earnings and it appears Nadella’s cloud vision is translating into success in the field and is a catalyst for deal flow. Cloud continues to be the Rock of Gibraltar for Microsoft as this was a source of strength yet again in the quarter.”
A continuing drag on the company are slowing PC sales, once Microsoft’s license-generating lifeblood. That market is on track for an 11% year-on-year decline, according to IDC.
But there are indications Microsoft is making headway in an increasingly mobile world. Verto Analytics recently found that 89% of 247 million adults accessing the web through any device reported using Microsoft’s online services such as Office365 and Skype.
“This stronger than expected quarter is indicative of the power of investing in the Cloud, given the company’s shrinking dependance on the PC market,” says Josh Olson, analyst with Edward Jones. “The 110 million devices running Windows 10 will be the fabric of Nadella’s strategy. Commercial cloud also is showing very good process, keeping pace with Amazon (Web Services). This is one of the most attractive turnaround stories in large-cap, more traditional tech. They’re changing their stripes.”
Nadella’s pointed mission has been to develop a solid consumer base via the company’s new Windows 10 operating system, which in turn provides an avenue for selling its Azure cloud services. He also has not been shy about forging a variety of partnerships in and beyond Silicon Valley, with companies that include Box, Salesforce and Dell. A Microsoft executive even made a rare appearance at Apple’s most recent event, for a demonstration of hits Office suite on the Cupertino company’s new business-focused iPad Pro.
Enterprise remains the principal target for Microsoft, given the company’s long roots in business-world applications. But recent moves — such as the introduction of new Lumia phones and upgrades to the company’s popular Surface tablet — suggest Microsoft has not given up on capturing the consumer market through both hardware and software.
Follow USA TODAY tech reporter Marco della Cava on Twitter @marcodellacava.
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