Microsoft CEO Satya Nadella waves goodbye to the audience during a keynote at the 2015 Microsoft... [+]
Investors are pleased with
Microsoft on Thursday reported financial results for the second fiscal quarter that beat Wall Street forecasts, and investors reacted sending shares up by about 3%.
The Redmond, Wash-based tech giant said revenue for the quarter was $25.7 billion and earnings per share were 78 cents. Analysts had expected $25.26 billion in revenue with 71 cents in EPS.
Investors continue to focus on how well Microsoft is progressing in the cloud business with its Azure cloud and Office 365 products. Revenue in its "Intelligent Cloud" unit grew 5% from the previous year to $6.3 billion. Within that unit, cloud services revenue grew 10% and Azure revenue grew 140%. Microsoft said one third of Fortune 500 companies now use the company's Enterprise Mobility services -- up three times from the same quarter last year.
In the company's "Productivity and Business Processes" group, revenue declined 2% year-over-year to $6.7 billion. But its Office 365 revenue grew nearly 70% with the subscriber count now at 20.6 million. Its revenue for the Dynamics business grew 11%.
In Microsoft first fiscal quarter released last October, Microsoft reported its annualized revenue run rate in the commercial cloud would be $8.2 billion. Microsoft now expects its commercial cloud annualized revenue run rate will exceed $9.4 billion.
“Businesses everywhere are using the Microsoft Cloud as their digital platform to drive their ambitious transformation agendas,” said Microsoft CEO Satya Nadella in a statement. “Businesses are also piloting Windows 10, which will drive deployments beyond 200 million active devices.”
In the cloud business, Amazon is clearly far ahead of Microsoft. Amazon Web Services has an estimated market share of 30% versus 10% for Microsoft, according to Synergy Research Group. But Microsoft is catching up with its 140% year-over-year growth in Azure -- Amazon reported AWS' revenue grew only 69% in the company's fourth quarter earnings released on Thursday.
As expected, Microsoft's legacy PC business experienced declines. Revenue for the unit went down 5% to $12.7 billion from the year before. Revenue from Windows declined 5%. The company said its new operating system, Windows 10, is now active on more than 200 million devices. Revenue for its own Surface devices grew by 29% with the launch of two new devices, the Surface Pro 4 and Surface Book.
Investors have taken an over all positive view of Nadella's efforts to turn around the company since he took over as CEO in February 2014. The company's stock is up 29% in the past year.
In 2015, Nadella went through the painful process of a$7.6 billion write down for its acquisition of phone maker Nokia.
