Second quarter results for Microsoft reveal an increase in revenue of 12% compared to 2016, with Azure and Intelligent Cloud services growing faster than expected.
On January 31, 2018, Microsoft reported on its financial results for second quarter of the fiscal year. The announced results were exemplary, beating general consensus predictions for both revenue and earnings per share. Wall Street and shareholders were pleased, as you would expect.
However, during the conference call explaining the financial results to analysts and other stakeholders, Microsoft mentioned several details regarding products and services that could be used as trend indicators for the information technology industry as a whole. While revelations concerning increased use of cloud services by enterprises worldwide was anticipated, other results pertaining to LinkedIn and SharePoint may surprise many and may suggest movement in how enterprise businesses function going forward.
SEE: Securing Windows policy (Tech Pro Research)
For the quarter ending December 31, 2017, Microsoft reported revenue of $28.9 billion, which was up 12% compared to the same period in 2016. Gross margins on the revenue increased 12%, while operating income increased 10%. Earnings per share reached $0.96 per share. All of those results were higher than forecast and signal the company's strategies have been successful and profitable.
Breaking some of the results down to their component parts, Microsoft was quick to point out that LinkedIn, the professional social network Microsoft acquired with much fanfare in 2016, had contributed $111 million to operating incomes for the quarter. In other words, despite what pundits may have told you, LinkedIn is making money for Microsoft.
Not surprisingly, the fastest rate of growth was in cloud services, with the company's Intelligent Cloud segment delivering $7.8 billion in revenue, which represents a growth rate of 15% over 2016. Azure alone saw revenue growth accelerate by 98% during the quarter, a staggering achievement by any measure.
During the question and answer part of the earnings call, Amy Hood, Microsoft Chief Financial Officer, mentioned that the company is seeing significant growth in the use of SharePoint in Office 365. Microsoft can track this usage because, in most cases, they are responsible for providing the server infrastructure that supports it. TechRepublic recently published a SharePoint cheat sheet that explains just how this service works and why more and more enterprises are using it as a basis for employee collaboration.
SEE: Five ways Microsoft SharePoint can help teams collaborate (TechRepublic)
Judging by the financial results reported for the most recent quarter, it is obvious that Microsoft is currently hitting on all cylinders with its business strategies. Windows 10, Office 365, Azure, and cloud services are experiencing accelerating rates of growth and the company is exceeding expectations. All good news for shareholders and customers.
However, Microsoft cannot afford to rest on its laurels. Other companies can see the potential market for cloud services, and the rate at which enterprises are embracing the technology. With Amazon and Google in the competitive landscape, Microsoft is in direct competition with some of the most aggressive, and most financially capable, companies in the world. Maintaining these financial results into the future is going to be a challenge, and interesting to track.
- Microsoft has set itself up for success—now it's time to make something happen (TechRepublic)
- Microsoft folds LinkedIn contact info into Outlook to boost business communications (TechRepublic)
- Microsoft Teams: The smart person's guide (TechRepublic)
- The Microsoft Graph is about to light up a new way for business users to search (ZDNet)
Have you taken a close look at Microsoft's cloud services lately? Share your thoughts and opinions with your peers at TechRepublic in the discussion thread below.
Note: Mark W. Kaelin has no financial interest in Microsoft and does not own stock in the company.