Microsoft Corporation (ticker: MSFT) closed out its fiscal 2017 year on Thursday by reporting fourth-quarter revenue and earnings beats. Microsoft’s transition to a subscription-based cloud services compay appears to be going smoothly, with the tech giant reporting strong growth numbers in key segments.
Microsoft reported earnings of 98 cents per share, excluding certain items, on revenue of $24.7 billion. Both numbers topped consensus analyst expectations of 71 cents and $24.27 billion, respectively.
Revenue from Microsoft’s Azure commercial cloud business was up 97 percent from a year ago, and the company reported an annualized commercial cloud run rate of more than $18.9 billion.
“Innovation across our cloud platforms drove strong results this quarter,” CEO Satya Nadella says. “Customers are looking to Microsoft and our thriving ecosystem to accelerate their own digital transformations and to unlock new opportunity in this era of intelligent cloud and intelligent edge.”
Office 365 revenue was up 43 percent from a year ago and professional social networking site LinkedIn contributed $1.1 billion in revenue on the quarter as well.
The company’s personal computing segment was expectedly weak, registering $8.8 billion in revenue, down 2 percent from a year ago. Microsoft attributed much of the weakness to declining phone revenue. Gaming revenue was up 3 percent on strength in Xbox software sales.
Search advertising revenue was up 8 percent to $124 million driven by higher revenue per search and higher search volume from Microsoft’s Bing search engine.
Looking ahead to fiscal 2018, Microsoft is expecting to focus its energy on cloud services and subscription revenue.
“One of the key things to watch for is how successful Microsoft is going to be in converting consumers to a subscription model,” BK Asset Management managing director of foreign exchange strategy Boris Schlossberg said earlier this week.
Schlossberg said Microsoft’s business is trending in the right direction and MSFT stock is a “relative value bet” at its current share price.
“Instead of trying to capture revenue all the way up front, they made a very astute business decision to try to capture revenue every single year by locking customers in to their Office 365 product,” he said.
On the company’s earnings call, Microsoft CFO Amy Hood guided…
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