Microsoft Report Massive Spike In Profits Due To Azure Cloud

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Our commercial cloud business surpassed more than $23 billion in revenue for the year with gross margin expanding to 57%.

Fiscal year 2018 revenue grew 14% to $110.4 billion; full -year operating income grew 21% to $35.1 billion.

Microsoft now has three reporting segments: Productivity and Business Processes (covering Office, Exchange, SharePoint, Skype, and Dynamics), Intelligent Cloud (including Azure, Windows Server, SQL Server, Visual Studio, and Enterprise Services), and More Personal Computing (covering Windows, hardware, and Xbox, as well as search and advertising).

"Microsoft has successfully come from behind to exceed Amazon's cloud revenue, and that gap is only increasing in Microsoft's favour", Mark Sami, vice president at consultancy firm SPR said.

Speaking to financial analysts on a conference call, Nadella made a point of praising Azure, noting Microsoft's recently signed mega-deal with Walmart to provide all of the cloud backend for the U.S. big-box behemoth.

Notably, Azure - considered the leading rival to the dominant Amazon Web Services - saw revenue growth of 89% from the same period in 2017, though Microsoft doesn't disclose specific financials for the service.

Helped by a boom in demand for cloud-based software, Microsoft has more than doubled in value since Satya Nadella took over as chief executive in 2014 and refocused the software behemoth on newer businesses.

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Things to watch for are how Microsoft will expand this model.

Wall Street wasted no time in reacting with Microsoft shares hitting all time highs this morning opening at $108 before settling to about $106 in afternoon trading, a roughly 2% gain for the day.

Microsoft's Productivity and Business Processes, which includes Office, Dynamics and LinkedIn, had a revenue increase of 13%. Surface sales crossed $4.6 billion in FY18, while Windows Pro revenues rose by 14 percent.

"Surface notebook revenue increased 25 per cent driven by strong performance of the latest editions of Surface against a low prior year comparable", the company said.

The COO also added about the trail of recent acquisitions for the company and how they are looking to bridge the gap between mobile, PC, and console gaming.

Nadella said Office 365 has more than 135 million users, and that a mobile version of Outlook is used on more than 100 million devices powered by Android or Apple software.