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Microsoft Azure, Office 365 Cloud Growth Boost Q3 Profits

Strong demand for Microsoft Azure and Office 365 cloud services boosted the company’s profits 27.8 percent last quarter, Microsoft announced Thursday.

Net income was $4.8 billion, or 61 cents per share, in the third quarter of the 2017 fiscal year, which ended March 31. That’s up from $3.76 billion, or 47 cents per share, in the same quarter last year.

Commercial cloud revenue reached an annual run rate of $15.2 billion at the end of Q3. Run rate is an estimate of annual revenue calculated by multiplying revenue in the last month of the quarter by 12.

The run rate was about $14 billion at the end of Q2. “Our results this quarter reflect the trust customers are placing in the Microsoft Cloud,” CEO Satya Nadella said in a statement.

Cloud Growth

Commercial cloud revenue includes Microsoft Azure, Office 365 for business, Dynamics, the Enterprise Mobility Suite (EMS) and more.

Azure revenue soared 93 percent, but Microsoft did not break out a dollar figure. Azure is lumped under “intelligent cloud” revenue, which increased 11 percent to $6.8 billion.

However, analysts believe Azure revenue reached $2.7 billion last year, more than doubling 2015 figures. That high-growth trajectory is expected to continue, as Azure is surpassed only by Amazon Web Services (AWS) in IaaS market share.

In other specifics:

  • Office commercial products and cloud services revenue grew 7 percent, driven largely by Office 365.
  • Office consumer products and cloud services revenue increased 15 percent.
  • Dynamics products and services revenue grew 10 percent, fueled by Dynamics 365.
  • Server products and services revenue – which includes Azure – grew 15 percent.
  • Enterprise Services revenue decreased 1 percent.

PC Declines

Unsurprisingly, personal computing revenue declined 7 percent to $8.8 billion.

Surface revenue dropped a considerable 26 percent, while slight gains were made in Windows OEM, Windows commercial products and cloud services, search advertising, and gaming.

Since taking the helm in 2014, CEO Nadella has worked to boost Microsoft’s cloud computing business to counteract continuing PC declines.

Microsoft’s total Q3 revenue was $22.1 billion, falling slightly short of Wall Street expectations. Profits surpassed expectations.

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