Microsoft Became A Trillion Dollar Company Thanks To Azure

Last week, Microsoft (Nasdaq: MSFT) announced its quarterly results that surpassed market expectations and sent the stock soaring. Not only did its stock scale record high levels, but its value also sent Microsoft into the trillion-dollar valuation territory. It became the third public company to cross that threshold after Apple and Amazon did that last year.

Microsoft’s Financials

Microsoft’s Q3 revenues grew an impressive 14% over the year to $30.6 billion and were significantly ahead of the market’s forecast of $29.84 billion. It ended the quarter with a net income of $8.8 billion, reporting an 18% growth over the year. Diluted EPS grew 20% over the year to $1.14 for the quarter. The Street had forecast an EPS of $1 for the quarter.

By segment, revenues in Productivity and Business Processes grew 14% to $10.2 billion with Office Commercial products and cloud services revenue growing 12%. Office Consumer products and cloud services revenue increased 8% with Office 365 Consumer subscribers growing to 34.2 million. During the quarter, LinkedIn revenues increased 27% and Dynamics products and cloud services revenue increased 13% over the year.

Revenues in Intelligent Cloud grew 22% to $9.7 billion with Server products and cloud services revenue increasing 27%, driven by Azure revenue growth of 73%. Enterprise Services revenue increased 4% over the year.

Revenues in More Personal Computing grew 8% to $10.7 billion with Windows Commercial products and cloud services revenues growing 18%, Surface revenues growing 21%, and Gaming revenues increasing 5%. Within the segment, Search advertising revenues excluding traffic acquisition costs increased 12% over the year.

Overall, Microsoft reported its commercial cloud business run-rate of $38.4 billion compared with the market’s forecast of $38.5 billion.

For the current quarter, Microsoft expects revenues of $32.55 billion with an EPS of $1.20. The Street expects Microsoft to end the current quarter with revenues of $32.6 billion and an EPS of $1.18.

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