Cloud computing boosts Microsoft's profits

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Microsoft reported strong fourth-quarter earnings on the back of its fast-growing cloud computing business, stoking optimism that the once-stagnant company has found a new groove.

The results were the clearest sign yet that the strategy put in place by Chief Executive Satya Nadella when he assumed the top job in 2014 is paying off. He has shifted the company's focus away from a dying personal computer software business and reinventing it as a provider of cloud computing and subscription-based software.

“Our technology world view of an intelligent cloud and an intelligent edge is resonating with customers everywhere,” Nadella said on the company’s earnings conference call with investors on Thursday afternoon.

Most notably, revenue from the cloud unit, which includes the flagship Azure platform and server products, rose about 11 per cent to £5.72bn ($7.43bn) in the fiscal fourth quarter ending 30 June.

Analysts on average had expected cloud revenue of £5.63bn ($7.32bn), according to data and analytics firm FactSet. Revenue from Azure, which competes directly with Amazon.com's market-leading AWS division, nearly doubled in the quarter.

Highlighting Azure's growth were notable increases to Microsoft's long-term unearned revenue, which rose by more than 61 per cent year-over-year. The metric is used to indicate long-term commitments for services and products, said Kim Forrest, vice president and senior equity analyst at Fort Pitt Capital Group, a portfolio management firm.

In a bid to continue this momentum, Microsoft last week launched Azure Stack, a new service that allows customers to run a local version of the company's cloud technology.

“This isn't just a one-quarter wonder,” Forrest said. "Amazon is going to be paying attention to this."

Reuters