Despite a weak global PC market, revenue in Microsoft’s personal computing division rose 7%, to $13 billion. The gains were fueled by a 13% increase in Windows commercial products and cloud services revenue, a 31% jump in Xbox software and services revenue, and a 39% surge in Surface revenue.
Productivity and business processes revenue — which includes Microsoft’s Office, Dynamics, and LinkedIn businesses — rose 13% to $10.1 billion. Key drivers included LinkedIn, Office 365 commercial, and Dynamics 365, which saw their revenue increase 29%, 34%, and 51%, respectively.
Meanwhile, Microsoft’s intelligent cloud division — which includes its server and cloud computing businesses — remains the company’s strongest growth driver. Revenue in this segment rose 20% to $9.4 billion, due largely to a staggering 76% rise in Azure revenue.
Microsoft is one of the biggest beneficiaries of the shift toward cloud computing. Image source: Getty Images.
Across all its divisions, Microsoft is enjoying rising demand for its enterprise-focused cloud services. “Our solid execution delivered another strong quarter, with commercial cloud revenue growing 48% year over year to $9.0 billion,” CFO Amy Hood said in a press release. “We continue to make strategic investments to capture expanding market opportunities to drive growth across our businesses.”
Moreover, Microsoft’s cloud business continues to grow more profitable as it expands; commercial cloud gross margin improved 5 percentage points year over year to 62% in the second quarter.
All told, Microsoft’s operating income increased 18% to $10.3 billion, while net income — adjusted to exclude the impact of tax reform — rose 14% to $8.6 billion, or $1.10 per share.
For the third fiscal quarter, Microsoft expects:
Productivity and business processes revenue of $9.9 billion to $10.1 billion, including “double-digit growth” in Office commercial and Dynamics revenue.
More personal computing revenue of $10.35 billion to $10.65 billion, including greater than 20% growth in Surface revenue.
Intelligent cloud revenue of $9.15 billion to $9.35 billion.
Management said Microsoft’s cloud-based services should continue to fuel growth in the quarters ahead.
“Our strong commercial cloud results reflect our deep and growing partnerships with leading companies in every industry, including retail, financial services, and healthcare,” CEO Satya Nadella said. “We are delivering differentiated value across the cloud and edge as we work to earn customer trust every day.”
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Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of Microsoft. The Motley Fool has a disclosure policy .
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