Microsoft Corp. beat expectations for its 2020 fiscal first quarter ended Sept. 30 on the continued strength of its Azure cloud-computing services.
Speaking during an Oct. 23 earnings conference call, Microsoft CEO Satya Nadella touted the company's cloud partnerships with VMware Inc. and Oracle Corp., as well as the recent partnership with Germany software giant SAP SE.
"Every Fortune 500 customer today is on a cloud migration journey, and we are making it faster and easier," Nadella said. "With a migration to the cloud, customers are looking for us to be a provider of all their infrastructure needs, which is heterogeneous. I feel we now have the ability to be able to take the entire infrastructure estate, the entire data estate and really add value with these partnerships."
Nadella also highlighted Azure's hybrid cloud capabilities as one of the key features that are driving customer growth. He noted that the hybrid cloud is not a transitory phase for Azure but a "long-term vision for how computing will meet the real-world needs."
Microsoft reported total revenue of $33.06 billion for its fiscal first quarter ended Sept. 30, up 14% from $29.08 billion in the prior-year period.
Net income for the quarter totaled $10.68 billion, or $1.38 per share, up 21% from $8.82 billion, or $1.14 per share, a year ago. The S&P Global Market Intelligence consensus GAAP EPS estimate for the quarter was $1.24.
Microsoft's productivity and business processes grew 13% year over year to $11.08 billion in the quarter, driven by Microsoft's Office commercial and consumer products, which were up 13% and 5%, respectively. Office 365 consumer subscribers increased to 35.6 million in the quarter. LinkedIn revenue increased 25%, while dynamics products and cloud services revenue increased 14%.
The intelligent cloud segment swelled 27% to $10.85 billion in the quarter, with server products and cloud services revenue up 30%, driven by Azure revenue growth of 59%. Enterprise services revenue in this segment increased 7%.
Revenue in the company's more personal computing segment rose 4% to $11.13 billion, with Windows OEM revenue up 9% and Windows commercial products and cloud services up 26%. Search advertising revenue excluding traffic acquisition costs increased 11%, Xbox content and services revenue was relatively unchanged and Surface revenue decreased 4%.
Speaking about the company's segment guidance for the fiscal second quarter ending Dec. 2019, Microsoft CFO Amy Hood said the company expects productivity and business processes revenue to range between $11.3 billion and $11.5 billion, driven by double-digit growth across Office Commercial, Dynamics and LinkedIn. Intelligent cloud revenue is expected to be between $11.25 billion and $11.45 billion.
"In Azure, we expect continued strong growth in our consumption-based business and moderating growth in our per user business given the size of the installed base," Hood said. "Our on-premises server business will be driven by demand for our hybrid and premium solutions as well as the continued benefit from increased demand ahead of the end of support for Windows Server 2008."
As for more personal computing, revenue is expected to range between $12.6 billion and $13 billion, with Windows 10 demand expected to go up with the upcoming end of support for Windows 7, the CFO said.
"At the company level, we continue to expect double-digit revenue and operating income growth driven by continued momentum in our commercial business," Hood said, adding that Microsoft also expects operating margins to be up slightly year over year.