For Microsoft, it's all about the cloud

Microsoft edges above US$600 billion market cap

"A slowly improving PC environment is also a modest tailwind for Microsoft with cloud remaining the Trojan horse growth driver for Redmond over the coming years".

Microsoft hit a new milestone in its cloud services business this quarter: it's now able to project over $20 billion in annual revenue.

Revenue from Azure, which competes with Amazon.com's Amazon Web Services and offerings from Alphabet's Google, IBM and Oracle, grew 90 per cent compared to a 97 per cent growth rate in the preceding quarter.

"They crushed it again", said Stifel Nicolaus & Co. analyst Brad Reback.

Microsoft beat analyst expectations, which predicted $23.56 billion in revenues. Earlier in October, International Data Corp. reported world-wide PC shipments fell 0.5% in the third quarter.

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Overall, Microsoft reported first quarter net income of $6.6 billion, or 84 cents a share, on revenue of $24.5 billion, up 12 percent from a year ago.

Microsoft shares rose 3.4 percent to $81.40 in extended trading following the report, after closing at $78.76 in NY. If Microsoft shares stay at these levels when markets open Friday, it would be an all-time high. The changes also have the approval of shareholders, whose optimism has nearly doubled the company's stock price during Nadella's three and a half years as CEO.

The engines of Microsoft's growth have been its Intelligent Cloud segment, which includes Azure, and its Productivity and Business Processes segment, which includes the Office franchise. While that may seem like a big but arbitrary milestone, it's an important one for Microsoft. Dynamics revenue grew 13%, though the company didn't disclose a revenue figure. In 2015, Nadella set a target of $20 billion in cloud revenue by 2018. Revenues in More Personal Computing segment, which includes Windows operating system, was relatively unchanged at $9.4 billion.

Microsoft today announced its quarterly earnings for its first financial quarter of 2018 (yes, I know it's early, but that's how Microsoft's financial quarters work). Another strong point was Microsoft's Surface hardware revenue, which surged 12% for the quarter after the Surface Laptop was introduced in June. Windows OEM revenue was also up 4 percent and search advertising revenue increases 15 percent.

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