Dive Brief:
- Revenue from Microsoft Azure grew 120% and usage of its Azure compute and SQL database more than doubled year-over-year, according to third-quarter earnings released Thursday.
- Even with strong enterprise growth, Microsoft's earnings fell short of analysts' estimates because of a downturn in personal computer sales that impacted the Windows business, Reuters reported.
- Revenue in the "Intelligent Cloud"—the business segment that includes the Azure cloud infrastructure, services and server software—grew 3% to $6.1 billion.
Dive Insight:
Even though the company did not meet analysts' expectations, strong performance in the cloud points toward Microsoft's long-term strategy of "mobile-first, cloud-first." For future growth, Microsoft has looked to its cloud technology and services, focused more on helping customer's with their digital transformations rather than personal computing.
"Organizations using digital technology to transform and drive new growth increasingly choose Microsoft as a partner," said Satya Nadella, chief executive officer at Microsoft, in a statement. "As these organizations turn to us, we’re seeing momentum across Microsoft’s cloud services and with Windows 10."
The cloud growth, along with the 7% quarterly growth of Office commercial and cloud services, thanks to Office 365, has helped the company navigate the declining PC market. Last week, Gartner said PC sales fell nearly 10% in the first quarter of 2016. The analyst firm reported that in the first quarter of 2016 total worldwide PC shipments dropped to 64.8 million, marking the first time they fell below 65 million since 2007.
In the third quarter, which ended March 31, Microsoft's net income fell to $3.76 billion from $4.99 billion the year before. Analysts had expected profit of 64 cents per share on $22.09 billion of revenue, Thomson Reuters said.
Revenue fell to $20.5 billion from $21.7 billion the year before.
