Microsoft Corp.'s 12% year-over-year revenue growth in its fiscal second quarter was driven in part by a significant surge in the company's cloud-computing business.
The company's Intelligent Cloud segment revenue grew 15% year over year to total $7.80 billion, with 98% revenue growth in Azure, the cloud platform that competes with Amazon.com Inc.'s Amazon Web Services.
Speaking on a Jan. 31 earnings conference call, CEO Satya Nadella attributed Azure's outperformance in the quarter to the platform "really having an architectural advantage."
"When it comes to infrastructure, we're the only cloud provider that provides true hybrid cloud computing with Azure and Azure Stack. When it comes to the data tier, we have real uniqueness," the CEO said.
Microsoft also reported 25% year-over-year revenue growth in its Productivity and Business Processes segment, which was driven by higher recurring subscription revenue from Office 365's subscriber base that, according to CFO Amy Hood, is now at 29.2 million. The segment further benefited from unit LinkedIn Corp.'s better-than-expected $1.30 billion in quarterly revenue.
"LinkedIn continues its strong trajectory with accelerating revenue growth and record levels of engagement, the fifth consecutive quarter of more than 20% sessions growth," Nadella said. "This increased engagement across the platform is driving strong growth in demand for sponsored content and marketing solutions and record levels of job postings and job visitors in Talent Solutions."
In the More Personal Computing segment, revenue was up 2% year over year with better-than-expected results driven by Windows and search. Moreover, gaming revenue grew 8%, mainly driven by the launch of the Xbox One X console, which according to Nadella "was the top-selling premium console this holiday in the U.S."
When asked to comment on reports that the Xbox is falling behind Sony Corp.'s PlayStation due to a lack of exclusive titles, Nadella avoided comparing the two consoles directly, and instead explained that Microsoft's real gaming strategy going forward extends beyond the console business to other devices, including PCs and mobile.
"We have a more broader gaming view in terms of what value we can add with our subscription and streaming services across all devices," Nadella said.
Microsoft saw a $13.8 billion net charge in its fiscal second quarter as a result of recent changes to U.S. tax laws, which resulted in a net loss of $6.30 billion, or 82 cents per share, for the period ended Dec. 31, 2017, compared to net income of $6.27 billion, or 80 cents per share, in the comparable 2016 quarter. Adjusting for the one-time expenses, non-GAAP net income jumped 20% year over year to $7.50 billion, or 96 cents per share. The S&P Capital IQ consensus EPS estimate for the just-ended quarter was 87 cents on a GAAP and normalized basis.
In response to an analyst's question about whether Microsoft would take advantage of repatriating its overseas cash reserves with a large strategic deal or share repurchases and dividends, Hood said that the company has always made acquisitions when they made sense, regardless of the situation. She did acknowledge, however, being "pleased, obviously, to be able to access the cash more easily and not have to go through the debt market to be able to make these choices."
