Microsoft profit slumps a bit

Software King of the World Microsoft slightly missed Wall Street’s average revenue estimate for the latest quarter on Thursday.

The Tame Apple Press has rushed to blame Vole’s sales of its Surface tablets and laptops slump in the face of revamped competition in the personal computer market. The revamped competition being that Apple has something new out which has also proved disappointing.

In fact, Microsoft’s figures were not that bad. Cloud margins improved and the company’s annual commercial cloud revenue run rate reached $15.2 billion, a 50 percent year-on-year improvement. It marks good progress toward its goal of pushing the figure to $20 billion by 2020.

Nadella said Microsoft reached 100 million monthly active users for Office 365 commercial, the firm’s flagship cloud productivity software, the first time Microsoft has given such a figure.

For the fiscal third quarter, ended March 31, overall revenue on an adjusted basis climbed 6 percent to $23.56 billion, but missed analysts’ average estimate of $23.62 billion.

Revenue from Microsoft’s personal computing unit, its largest by revenue, fell 7.4 percent to $8.84 billion. Analysts on average had expected revenue of $9.22 billion, according to research firm FactSet StreetAccount.

The business includes Windows software, Xbox gaming consoles, online search advertising and Surface devices.

Surface revenue plunged 26 percent to $831 million, down from $1.3 billion in the year-ago quarter. And the reason is that Microsoft has yet to refresh its Surface range – which has been on the market now for a while.

Microsoft’s Windows OEM revenue, a measure of the company’s license revenue from computer makers such as Dell and HP, rose five percent. Dell reported strong increases in computer sales driven by high-end laptops.

Revenue from the unit that Microsoft calls “Intelligent Cloud,” which includes server products and the company’s flagship cloud computing platform, Azure, jumped about 11 percent to $6.76 billion in the quarter.

Azure revenue soared 93 percent in the quarter. The service competes with Amazon.com Inc’s Amazon Web Services, the market leader in cloud infrastructure, as well as offerings from Alphabet Inc’s Google, IBM and Oracle Corp.

Microsoft’s commercial cloud gross profit margin reached 51 percent, up from 48 percent the previous quarter. Microsoft has been emphasizing higher-margin premium products such as databases and recently started building its own servers rather than relying on Hewlett Packard Enterprise, driving the cloud margins higher, analysts said.

Microsoft also, for the first time, reported a revenue growth rate for Dynamics 365, its competitor to Salesforce.com Inc’s online sales software. Revenue grew 82 percent in constant currency, though the firm did not give an absolute dollar total.

Microsoft said LinkedIn, which it bought for about $26 billion, contributed $975 million in revenue in the quarter, $25 million more than analysts had expected.

The company’s net income rose to $4.80 billion, or 61 cents per share, in the quarter, from $3.76 billion, or 47 cents per share, a year earlier.