Microsoft Beats Expectations, But Growth in Azure Slows

Microsoft shares rose by up to 4% above their closing price of $102.32 on Wednesday following the posting by the company of earnings that were better than had been expected for the software giant’s fiscal first quarter.

Revenue for Microsoft finished the quarter at $29.08 billion while analysts were expecting $27.90 billion. Earnings per share reached $1.14 while analysts were expected 96 cents per share.

Part of the stock gain following the announcement of earnings was lost after Microsoft released is guidance for the second quarter.

The CFO at Microsoft Amy Hood said during the company earnings call that the software giant expects revenue of between $31.9 billion and $32.6 billion during its second quarter, which would include GitHub an acquisition that it has not yet closed.

Analysts were expecting revenue outlook for the company’s second quarter to be 32.25 billion.

Revenue at Microsoft was up 19% year over year during the quarter. Analysts were expecting growth of 13.7%, which was just less than the growth of 14% Microsoft had for its complete 2018 fiscal year.

Microsoft is continuing to emphasize its growth from cloud services that are business focused which is tracked in the metric for Commercial Cloud revenue. The company’s Azure business is challenging Amazon Web Services, the leader in the public cloud market.

Microsoft has started to include its commercial revenue from LinkedIn, which includes products such as LinkedIn Recruiter, in its tally for Commercial Cloud.

In a September presentation to its investors, Microsoft showed how by adding LinkedIn to the revenue of Commercial Cloud for the 2018 year would increase the total by $3.4 billion, which would reflect an increase of close to 15%.

Commercial Cloud ended the quarter at $8.5 billion in revenue which was up 47% year over year. Analysts were expecting Commercial Cloud revenue to reach $8.3 billion.

Revenue at Azure was up over 76%, slipping from growth of 89% during the previous quarter. The performance by Azure was equal to expectations by Microsoft.

Over the last few days, several analysts said they were expecting a growth slowdown for Azure.

Microsoft has yet to disclose the amount of revenue brought in by Azure, but analyst estimates it has generated over $7.74 billion during its fiscal year, which would have represented 7% of Microsoft’s overall revenue.

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