Microsoft reports good Azure results, but overall sales are weak

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Microsoft says its commercial cloud is now at a $10bn annualised run rate

Microsoft delivered sturdy cloud services growth in its third quarter earnings report last night, but group revenue and earnings disappointed, with shares falling on the announcement of $3.8bn (£2.65bn) profits.

Cloud

Microsoft said that its cloud is hitting an annualised run rate ‘exceeding’ $10bn (£7bn).

Microsoft’s cloud platform Azure is one of the mainstays in CEO Satya Nadella’s growth strategy, where the cloud platform is fighting fiercely with rivals Google and Amazon Web Services (AWS).

Azure’s revenue, reported under Microsoft’s Intelligent Cloud division, grew 120 percent in constant currency, with usage of Azure compute and Azure SQL database more than doubling year-over-year.

Microsoft HQTotal revenue in Intelligent Cloud grew 3 percent to $6.1bn (£4.3bn), but analysts had expected revenue of $6.28bn (£4.4bn).

Organisations using digital technology to transform and drive new growth increasingly choose Microsoft as a partner,” said Satya Nadella, Microsoft CEO. “As these organisations turn to us, we’re seeing momentum across Microsoft’s cloud services and with Windows 10.”

Microsoft’s quarterly sales stood at $20.5bn (£14.3bn). Windows 10 has been one of the company’s fastest growing operating systems, and Nadella claims it is now installed on more than 270 million devices.

Microsoft’s personal computing revenue grew just 3 percent, up to $9.5 billion (£6.6bn), with Windows computer revenue falling 2 percent. Microsoft has been hit hard by the global fall of PC shipments, with IDC analysts pointing to a dive of 11.5 percent year-on-year in the first quarter of 2016.

Redmond’s Surface revenue did grow 61 percent however, driven by Surface Pro 4 and Surface Book sales. Phone revenue dived 46 percent.

Amy Hood, Microsoft’s chief financial officer, said her company’s operational and financial discipline helped drive a solid quarter.

We remain focused on investing in our strategic priorities to drive long-term growth,” she said.

Revenue in Microsoft’s Productivity and Business Processes unit grew one percent to $6.5bn (£4.5bn). Office 365 saw a revenue growth of 63 percent.