Microsoft on Thursday reported high fourth-quarter revenue and profit, driven by sales increases from its cloud business and a surprisingly strong Windows business.
Revenue growth in Azure was 64% in the fiscal fourth quarter ended June 30, compared with 89% a year earlier and 73% in the prior quarter. Microsoft does not provide an absolute revenue figure for Azure, blending it into its “intelligent cloud unit,” which had revenue of $11.4 billion.
On Thursday, Microsoft’s Azure-based business segment for the first time ever reported slightly more quarterly revenue than its Windows-based segment.
In the cloud computing business, Azure’s chief rival is Amazon Web Services, which dominates the industry with a 32.8% market share, according to research firm Canalys. Microsoft has a share of 14.6%, while Google has 9.9%.
Revenue in Microsoft’s productivity software unit jumped 14.3% to $11.05 billion, driven by double-digit revenue growth for LinkedIn and Office 365.
The company's personal computing division, home to Windows software, rose to $11.3 billion. The unit also includes Xbox gaming consoles, the Bing online search service and Surface laptops.
Mike Spencer, head of investor relations at Microsoft, said Windows results were fueled by customers upgrading from Windows 7, which will be retired next year, and the result of some PC customers stockpiling inventory in anticipation of possible tariffs.
Total revenue rose 12% to $33.72 billion, above average analysts’ estimates of $32.77 billion.
“It was a record fiscal year for Microsoft, a result of our deep partnerships with leading companies in every industry,” said Satya Nadella, chief executive officer of Microsoft. “Every day we work alongside our customers to help them build their own digital capability – innovating with them, creating new businesses with them, and earning their trust. This commitment to our customers’ success is resulting in larger, multi-year commercial cloud agreements and growing momentum across every layer of our technology stack.”
The software maker pledged “double-digit” percentage gains in sales and operating income for the year that started July 1. Results are getting a boost from larger deals for its Azure web services and adoption of internet-based Office programs. Microsoft plans to increase operating expenses by 11% to 12% for the fiscal year, and will raise capital spending to build out data centers, Chief Financial Officer Amy Hood said.
Microsoft forecasted between $10.3 billion and $10.5 billion in intelligent cloud sales for the fiscal first quarter.