Microsoft’s Latest Earnings Shows Cloud Growth, But Don’t Forget About Windows

April 27, 2018, 5:49 PM UTC

Microsoft reported another strong quarterly sales gain primarily from its push into cloud computing and related cloud software.

The business technology giant said Thursday that revenue jumped 16% to $26.8 billion during its fiscal third quarter ending Mar. 31, exceeding the $25.8 billion expected by analysts.

But despite beating projections, Microsoft’s (MSFT) stock was up only about 1.1% to $95.32 during midday trading on Friday.

One possible reason for the modest investor enthusiasm is that Amazon’s (AMZN) competing cloud business, Amazon Web Services, also reported strong growth on Thursday, with its sales jumping 49% year-over-year to $5.44 billion. Amazon’s operating profit also rose 57% over the same period to $1.4 billion.

Microsoft doesn’t disclose operating profit for its so-called intelligence cloud unit, which includes certain server products and its Azure cloud computing business. But it said that sales in that unit grew 17% to $7.9 billion in its latest quarter.

Microsoft also said that sales in it Azure cloud computing business rose 93%, but it did not report a dollar amount.

Analysts typically consider Amazon to be the biggest cloud provider in terms of selling on-demand computing capacity followed by Microsoft. Wall Street would likely be more enthusiastic about Microsoft’s results if Amazon didn’t also report strong results on the same day.

As Synergy Research Group noted Friday, “As the cloud boom continues, Microsoft, Google and Alibaba have all substantially grown their market shares, but this has not been at the expense of AWS.”

Although Microsoft is now strongly emphasizing its growing Azure cloud computing business in favor of its older Windows operating systems business, Windows is still an important unit. Sales in Microsoft’s personal computing business segment—which includes Windows, Surface computers, and the Xbox—rose 13% year-over-year to $9.9 billion.

On a call with analysts, Microsoft CFO Amy Hood noted that corporate sales of Windows 10 is “very strong,” and that companies are upgrading PCs with new versions of Windows because of security and an “overall economy” that “is certainly also quite good.”

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Microsoft also said on Friday that a new Windows 10 update—The Windows 10 April 2018 Update—would arrive on Monday that would include some new features. Some of these include a new voice dictation service and a timeline feature that will make it easier for people to find photos or videos on their computers.

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