Microsoft doubles Q2 profit on strong cloud growth

Growing cloud momentum helped Microsoft report better than expected earnings during the June quarter, with net income more than doubling to US$6.51 billion ($8.22 billion).

The company reported revenue of US$24.7 billion, up 13% year on year. Revenue from Microsoft’s cloud business increased 11% to US$7.43 billion. Azure revenue nearly doubled, Microsoft said, without providing an exact breakdown of revenue.

During the quarter Microsoft likewise reached the milestone of earning more revenue from its cloud-based Office 365 subscription services than from its traditional software licensing business.

Office commercial products revenue increased 5%, driven by Office 365 commercial revenue growth of 43%, while Office consumer products and cloud services revenue increased by 13%.

But cloud enterprise services revenue fell 3% as a result of declines in custom support agreements.

Revenue from Microsoft’s CRM business Dynamics meanwhile grew 7%, with this growth again driven by a strong 74% increase in Dynamics 365 subscription revenues.

Based on the strength of Microsoft’s performance in the cloud, CEO Satya Nadella said the company remains on track to reach the goal of earning US$20 billion in commercial cloud revenue in the fiscal year 2018.

Microsoft isn’t the only company deriving more of its revenue from the cloud in place of traditional software sales. SAP CEO Bill McDermott last week announced that the company expects to be generating 70–75% of its revenue from cloud subscription and support sales by 2020.

The company’s June quarter results show that SAP generated 29% growth in cloud subscription and support revenue to €932 million ($1.37 billion), which compares to a 10% increase in overall revenue to €5.78 billion. But operating profit fell 27% to €926 million due to restructuring costs and other expenses.

Image courtesy Microsoft

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