Economy, Sci & Tech

Microsoft Surface Sales Slump, Cloud Keeps Going Strong

Microsoft Surface Sales Slump,  Cloud Keeps Going StrongMicrosoft Surface Sales Slump,  Cloud Keeps Going Strong

Microsoft Corp slightly missed Wall Street’s average revenue estimate for the latest quarter on Thursday, as sales of its Surface tablets and laptops slumped in the face of revamped competition in the personal computer market.

Shares of the world’s largest software company fell 0.6% to $67.85 in trading after the bell, Reuters reported on Friday.

Under Chief Executive Satya Nadella, who took the helm in 2014, Microsoft has sharpened its focus on the fast-growing cloud computing unit to counter a prolonged slowdown in the PC market, which has weighed on demand for its Windows software.

That transition remained on track, with cloud margins improving and the company’s annual commercial cloud revenue run rate - a bespoke metric closely watched by analysts - reaching $15.2 billion, a 50% year-on-year improvement. It marks real 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% 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% 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% to $831 million, down from $1.3 billion in the year-ago quarter.

Traditional high-end computers from other makers, along with the fact that many Surface products have been on the market for many months, distressed Surface sales, said Zack Moxcey, an investor relations director for Microsoft.

 Clouds Amass

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% to $6.76 billion in the quarter.

Azure revenue soared 93% in the quarter. The service competes with 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 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.

Microsoft’s shares had risen 9.9% this year through Thursday, eclipsing the 7% gain in the broader S&P 500.

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