Microsoft sales top estimates as its Azure cloud business signs up new customers

Microsoft Corp.’s cloud computing business fuelled quarterly sales and profit that topped analysts’ estimates, boosted by several new deals with large corporate clients.

Revenue rose 14 per cent from a year earlier to US$30.6 billion in the quarter ended March 31, the Redmond, Washington-based company said Wednesday in a statement. Analysts on average projected US$29.9 billion. Net income was US$8.8 billion, or US$1.14 a share, compared with an average analyst estimate of US$1 a share, according to data compiled by Bloomberg.

The fiscal third quarter featured a flurry of large brands, particularly in retail, signing agreements to use Microsoft’s Azure cloud software. Clients included grocer Kroger Co., Walgreens Boots Alliance Inc. and oil company Exxon Mobile Corp. Some, such as Walgreens, also committed to using cloud-based Office and security software.

The deals reflect Chief Executive Officer Satya Nadella’s efforts to draw some customers away from cloud market leader Amazon.com Inc. and sign more significant clients. Microsoft also is benefiting as more traditional companies that are long-time customers move to the cloud.

Azure cloud-services revenue rose 73 per cent, slower than the 76 per cent Microsoft posted in the fiscal second quarter. Some investors have been concerned that while Azure is still growing rapidly, those increases have slowed from the past when doubling was a regular occurrence. Sales of Office cloud software to business customers rose 30 per cent.

“The Azure growth blew away Street expectations,” said Dan Ives, an analyst at Wedbush Securities. “This was an A+ quarter across the board for Redmond.”

The company’s shares rose about 4 per cent in extended trading on the results, after closing at US$125.01 in New York. Microsoft shares have gained 23 per cent this year, topping the 17 per cent increase in the S&P 500 Index. The software maker, for a time, leapfrogged Apple to become the most valuable publicly traded US company by market capitalisation.