Microsoft profit up as cloud service soars

MICROSOFT Corp reported a 3,6% rise in fiscal second-quarter profit on Thursday, helped by growth in its fast-growing cloud computing business, but it saw a slight decline in margins in the unit that includes its flagship cloud platform Azure.

Since taking charge in 2014, chief executive Satya Nadella has steered the company toward cloud services and mobile applications and away from its slowing traditional software business.

Gross margins for Microsoft’s so-called ‘commercial cloud’ business, which includes Azure and versions of its online Office 365 product sold to businesses, were 48%, said Chris Suh, head of Microsoft’s investor relations.

That is down from last quarter’s 49% but up from 46% a year ago, Suh said. The figure is watched closely by investors as a sign of the actual profit made of Microsoft’s cloud products, which the company does not publish.

The Azure platform competes with cloud infrastructure offerings from market leader Amazon.com Inc, Alphabet Inc’s Google, IBM and Oracle Corp.

“We’re not at Amazon’s margin today,” said Suh. “Their infrastructure business is much larger. They have the benefit of scale. We track more like what Amazon was when they were closer to our size.”

Nadella emphasised that the company thinks of its cloud offerings as comprehensive line-up of both software and infrastructure, as it did with its historical business as a combination of products with different margins, like Office and Windows Server.

Along with his push into cloud and mobile, Nadella also orchestrated Microsoft’s biggest acquisition, the US$26,2 billion deal for LinkedIn, which closed last month.

LinkedIn contributed US$228 million of revenue in the quarter, Microsoft said, but reported a net loss of US$100 million, or one cent per share. –Nampa–Reuters

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