Microsoft's fiscal second quarter earnings highlighted commercial cloud momentum, a big Windows 7 end of life push to Windows 10 and solid results across its business units.
The company reported second quarter earnings of $11.6 billion, or $1.51 a share, on revenue of $36.9 billion, up 14% from a year ago.
Wall Street was expecting Microsoft to report fiscal second quarter revenue of $35.67 billion with earnings of $1.32 a share.
The company said commercial cloud revenue was up 29% from a year ago to $12.5 billion. That tally puts Microsoft's commercial cloud on a $50 billion annual run rate.
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In a statement, CEO Satya Nadella said the company is innovating with its technology stack and saw "expanding opportunity ahead." On a conference call, Nadella added:
Tech spend as a percentage of GDP is projected to double over the next decade. At Microsoft, we are focused on building the most differentiated tech stack to enable every organization in every industry to build their own digital capability and tech intensity, with a business model that is trusted and aligned with their success in this new era. Now I'll briefly highlight our innovation momentum, starting with Azure. Every customer will need a distributed computing fabric across the cloud and the edge to power their mission-critical workloads and meet regulatory as well as operational solvency needs.
Key items include:
- Commercial office products and cloud services revenue was up 16% with Office 365 Commercial revenue up 27%. On the consumer front, Microsoft's Office 365 had subscribers of 37.2 million.
- Dynamics revenue was up 12% and Dynamics 365 revenue was up 42%.
- Azure revenue growth was 62%, but Microsoft didn't break out a revenue figure so the mystery comparing Azure to AWS remains.
- Windows OEM revenue was up 18% led by commercial Windows products.
- Surface revenue was up 6%.
- LinkedIn revenue was up 24%.
- Productivity and business processes produces the most operating income for Microsoft, but the balance between the units is fairly evenly split.
- Research and development spending for the six months ended Dec. 31 was $9.17 billion, up from $8.05 billion a year ago.