Microsoft cloud annualized run rate passes $20 billion

Satya Nadella chief executive officer of Microsoft Corp. smiles during the Microsoft Developers Build Conference in Seattle Washington U.S. on Wednesday

Today, Microsoft released the results of its first quarter 2018 fiscal year earnings and the company's core competencies are up across the board with the software giant seeing gains in its Intelligent Cloud Business revenue up 14% YoY to the tune of $69 billion.

Microsoft said commercial cloud annualised revenue run rate reached US$20.4b in the quarter.

Total revenue climbed 12 percent as profit rose 16 percent. At the same time, as new data centers come online and become more efficient, Microsoft has been making progress in increasing the profitability of these services, with commercial cloud gross margin widening to 57 percent.

The technology giant's net income rose to $6.58 billion, or 84 cents per share, in the first quarter ended September 30, from $5.67 billion, or 72 cents per share, a year earlier.

Revenue from Azure, the company's cloud computing service, grew 90 percent during the quarter, Microsoft said.

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Productivity and Business Processes: This segment, which includes results from Office and Office 365 (commercial and consumer customers), grew 28 percent to $8.2 billion. That puts Surface revenue at over $1 billion this quarter, as the PC line continues to transform into a legitimate part of Microsoft's business.

Surface revenue by itself was up 12% from a year ago, which is good news for Microsoft following a dip in the previous quarter.

PiperJaffray analysts Alex Zukin, Scott Wilson and Taylor Reiners had expected 30 percent growth in Office 365 commercial revenue, which would have been down from more than 40 percent in revenue growth in the past two years.

As for Windows, revenue from companies putting Pro versions of the operating system on devices was up by 4 percent. Search acquisition costs jumped 15 percent.

On the Xbox front, Microsoft says hardware revenue declined significantly - due to lower pricing and fewer sales - but overall revenue still ticked up ever so slightly thanks to increased Xbox Live transactions.

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