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Microsoft up in the clouds on first-quarter earnings beat

Last updated: 18:11 27 Oct 2017 BST, First published: 08:48 27 Oct 2017 BST

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The growing cloud business is helping to offset declining demand for Windows – the technology that powered it to the top in the 1990s

Better-than-expected first quarter earnings helped push Microsoft Corporation (NASDAQ:MSFT) shares more than 6% higher in Friday's pre-market trade.

Strong demand from businesses for its cloud computing services and a more stable performance from its PC software division helped the New Mexico-based firm generate revenues of US$24.5bn in the three months ended September 30.

That’s 12% higher than the US$20.4bn it reported for the same period last year, and comfortably ahead of the US$23.6bn analysts had initially pencilled in.

Microsoft’s flying cloud business accounted for just shy of US$7bn of that, a 14% year-over-year rise.

That division has helped to offset falling Windows sales as demand for personal computers continues to weaken.

Chief executive Satya Nadella said perhaps the biggest achievement of the quarter was exceeding the self-imposed goal of a US$20bn in annualised revenue run rate for its commercial cloud business, which includes the Office 365 suite and Azure.

The company came up with a US$20.4bn commercial cloud run rate in the quarter, “outpacing the goal we set just over two years ago”.

At the end of the quarter Microsoft had 28mln Office 365 subscribers, up by 1mln from the previous quarter.

Gaming revenue was 1% higher at US$1.9bn, although this is expected to jump in the coming quarters as the company prepares to launch its new Xbox One X console in November.

LinkedIn sales were broadly flat at US$1.1bn.

“This quarter we exceeded $20 billion in commercial cloud ARR, outpacing the goal we set just over two years ago,” said Natella.

“Our results reflect accelerating innovation and increased usage and engagement across our businesses as customers continue to choose Microsoft to help them transform.”

In pre-market deals, shares jumped 6.02% to US$83.50.

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