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Microsoft's cloud strategy is paying off



Microsoft
Corp.


MSFT -5.35%

Cloud service is slowing down, but the company makes up for it with an offshoot of business mixing its software sales, a key strategy for competing with the market leader

Amazon.de
Inc.

This strategy, called hybrid computing, where customers run software in their own data centers but also use cloud services, increased sales of Microsoft server products and cloud services by 28% in the fiscal year quarter.

The Azure cloud computing business grew by 76% ̵

1; still healthy, but the slowest growth since Microsoft began publishing regular percentage earnings three years ago. Microsoft does not report sales for the business, but analyst Brad Reback of Stifel Nicolaus & Co. estimated Azure's revenue at $ 2.69 billion for the quarter.

The size of Azure makes it difficult to maintain growth rates, Amy Hood said Wednesday. "This is still big business, and it's still growing very fast," she said.

By comparison, Amazon's market-leading cloud infrastructure business grew 49% to $ 6.11 billion in the previous quarter.

Microsoft's Intelligent Cloud The segment, which includes Azure and server products, grew 24% to $ 8.57 billion, about $ 300 million above analyst expectations. "This shows absolutely the hybrid cloud strength of Microsoft," said Reback.

Overall, revenue increased 19% to $ 29.08 billion.

Net income increased 34% to $ 8.82 billion. Per share, the company announced a profit of $ 1.14. Analysts expected 96 cents of earnings per share with a turnover of 27.92 billion dollars.

Microsoft shares fell 5.4% to $ 102.32 on Wednesday and gained nearly 3% after business hours as Wall Street outperformed slightly. 19659007] One of the biggest growth areas came from Microsoft's gaming business, where revenue was up 44%. Ms. Hood emphasized the massive hit game "Fortnite" to increase that performance. Xbox Software and Services revenue jumped 36% – about half came from "Fortnite," she said.

Microsoft saw little impact on the longtime partner of the chip shortage

Intel
Corp.

Apparently in the last month, when it tried to satisfy the demand for PCs. Intel has been working to make chips available to costly computers, which are often running the most expensive versions of Windows, and that has helped drive up sales, Hood said.

More Personal Computing, which includes Windows and Xbox, increased 15% to $ 10.75 billion. The Productivity and Business Processes segment, which includes the Office Productivity franchise, grew 19% to $ 9.77 billion.

Azure and Office's accomplishments have driven Microsoft's return to the shortlisting of the highest-rated listed US companies. Its shares rose by about 19% in 2018, and its market capitalization of $ 785.56 billion goes to Apple Corp. and Amazon.

Write to Jay Greene at Jay.Greene@wsj.com


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