Microsoft's Q2 strong, but commercial cloud sequential revenue, bookings growth slows

Microsoft's commercial cloud units continued to hum in the fiscal second quarter due to Azure and Office 365, but growth may be slowing sequentially.

Microsoft's commercial cloud business continued to gain momentum, but its sequential growth rate appears to be slowing a bit.

The enterprise software's second quarter earnings were strong excluding a charge due to the Tax Cuts and Jobs Act. The company reported fiscal second quarter non-GAAP earnings of $7.5 billion, or 96 cents a share, on revenue of $28.9 billion, up 12 percent from a year ago. The company reported a net loss in the quarter of 82 cents a share due to a $13.8 billion charge due to tax changes.

Wall Street was expecting Microsoft to report second quarter earnings of 86 cents a share on revenue of $28.4 billion.

Ahead of the results, Wall Street analysts were expecting the second quarter to be driven by Office 365 and Azure with profit margin worries due to the launch of the xBox One X launch. Another wild card revolved around tax changes since Microsoft had $132 billion in offshore cash.

In Microsoft's statement, the company didn't tout its commercial cloud annual revenue run rate for the first time in several quarters. CEO Satya Nadella said the company's hybrid cloud wares and investments in the Internet of things, big data and artificial intelligence were paying off.

Now commercial cloud revenue for Microsoft's second quarter was $5.3 billion, up 56 percent from a year ago. But the sequential rate of growth is narrowing. Commercial cloud's annual revenue run rate is $21 billion now.

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By unit, Microsoft reported second quarter revenue of $9 billion, up 25 percent from a year ago, for its productivity and business processes division. Office 365 commercial licenses showed growth of 41 percent and Dynamics revenue was up 10 percent. LinkedIn revenue was $1.3 billion.

In the intelligent cloud unit, revenue for the second quarter was $7.8 billion, up 15 percent from a year ago. Azure revenue growth was up 98 percent.

Windows OEM revenue as up 4 percent in the quarter and the more personal computing division delivered second quarter sales of $12.2 billion.

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