Microsoft’s revenue exceeded $100bn for the first time in fiscal year 2018, the company reported Thursday, as the legacy software company’s efforts to reinvent itself as a major player in cloud computing continued to pay off.
Microsoft stock jumped more than 4% in after-hours trading as the company beat analyst expectations with earnings for the quarter of $8.8bn, or $1.14 per share.
“Our early investments in the intelligent cloud and intelligent edge are paying off, and we will continue to expand our reach in large and growing markets with differentiated innovation,” the chief executive officer, Satya Nadella, said in a statement.
On a conference call with investors, Nadella attributed the strong results in part to a recent reorganization of the company’s engineering teams to prioritize cloud computing and artificial intelligence over its legacy software products and Windows operating system.
The company’s stock price has tripled since Nadella took the helm from Steve Ballmer in 2014, earning praise for the executive’s strategic acumen. On 12 July, its market capitalization exceeded $800bn for the first time.
“The combination of the cloud, which is a megatrend that’s going to last for years to come, and the execution, this is a company that knows how to sell and be innovative, it’s hard to argue with anything here,” Tom Taulli, an InvestorPlace.com analyst, told Reuters.
Revenue for the company’s cloud computing service, Azure, grew 89% year over year, driving the company’s revenue growth for its server and cloud division to 26%. Though Amazon Web Services has long led the cloud computing market, Microsoft is increasingly cementing its position as a strong second, ahead of its rival Google.
On the earnings call, Nadella said he was “especially proud” of a new five-year deal between Microsoft and Walmart, which has been widely described as a strategic alliance against Amazon. Alex Zukin, an analyst at Piper Jaffray, told the Associated Press that the “threat of Amazon” would work in Microsoft’s favor as e-commerce companies seek a cloud computing platform that is not run by a competitor.
Thursday’s results did not account for Microsoft’s $7.5bn acquisition of the code-sharing site GitHub, which was announced in June but is still pending. Nadella spoke optimistically, however, of the “increasingly vital role the developers play” and the opportunity through GitHub to “bring our tools and services to a new audience”.
Microsoft also reported strong growth from other areas of its business, including social networking, gaming, and hardware.
Revenue for LinkedIn, the professional social networking site, increased 37% to $1.4bn, though the division saw an overall operating loss of $182m. Gaming revenue increased 39% to $2.3bn, with the company’s number of Xbox Live monthly active users increasing to 57 million.
Revenues for the Microsoft Surface grew 25% following a poor previous year. The company will begin shipping a new version of the tablet, the Surface Go, in August.
