Microsoft reported its fourth quarter earnings Thursday, beating market estimates thanks to strong growth in its cloud business.
GAAP net income came to $6.5 billion in Q4, or earnings per share of 83 cents, on revenue of $23.3 billion. Non-GAAP net income equaled $7.7 billion, or earnings of 98 cents per share, on revenue of $24.7 billion.
Wall Street was looking for earnings of 71 cents per share on revenue of $24.3 billion.
"Innovation across our cloud platforms drove strong results this quarter," CEO Satya Nadella said in a statement. "Customers are looking to Microsoft and our thriving partner ecosystem to accelerate their own digital transformations and to unlock new opportunity in this era of intelligent cloud and intelligent edge."
Revenue in Intelligent Cloud was $7.4 billion, a year-over-year increase of 11 percent. Within that business unit, server products and cloud services revenue increased 15 percent, driven by Azure revenue growth of 97 percent.
Within Intelligent Cloud, Enterprise Services revenue decreased 3 percent. Declines in custom support agreements were partially offset by growth in Premier Support Services.
Microsoft's largest business segment, its productivity and business processes unit, brought in $8.4 billion in revenue, an increase of 21 percent year-over-year. Within this category, Office commercial products and cloud services revenue increased 5 percent, driven by Office 365 commercial revenue growth of 43 percent. Dynamics products and cloud services revenue increased 7 percent, driven by Dynamics 365 revenue growth of 74 percent. LinkedIn contributed revenue of $1.1 billion during the quarter.
Revenue in More Personal Computing was $8.8 billion, down 2 percent largely because of lower phone revenues. Windows OEM revenue managed to increase 1 percent, even as worldwide PC shipments have continued their downward trend. Surface revenue decreased 2 percent, mainly due to product lifecycle transitions. Search advertising revenue excluding traffic acquisition costs increased 10 percent.
The strong results from Azure, along with the impressive growth from Office 365 and Dynamics 365, are "very positive signs of just how much progress the company is making in newer product segments," according to analyst Patrick Moorhead, founder of Moor Insights & Strategy. Meanwhile, he said, Surface could start ticking up next quarter as Surface Laptop and Surface Pro become fully available across all channels and countries.
"Microsoft is one of the few companies to turn the corner from classic enterprise to cloud-native," Moorhead said, citing recent wins with marquis Microsoft customers like FedEx, HSBC, T-Mobile, BMW, Baidu in cloud-native areas like Azure, IoT, mobility, CRM, and team collaboration.
For the full fiscal year ending June 30, 2017, Microsoft reported non-GAAP earnings of $3.31 on non-GAAP revenue of $96.7 billion.