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Image credit: Nicolas McComber

Microsoft's cloud business just keeps growing

But it's taking a big hit for the recent tax bill.
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Nicolas McComber

If there's one major takeaway from Microsoft's earnings reports over the last few years, it's this: The cloud is everything for Microsoft. And, based on the company's financials for the second quarter of 2018, its success in the cloud doesn't appear to be slowing down anytime soon. Microsoft reported a 12 percent revenue jump for the period, reaching $28.9 billion up from $25.8 billion a year ago. And mostly, that growth was driven by the company's investments in cloud services.

The "Productivity and Business Processes" group, which includes Office 365 and its cloud apps, saw its revenues increase by 25 percent. Azure revenue jumped by 98 percent, leading to a 15 percent increase for Microsoft's "Intelligent Cloud" group. That more than makes up for the relative stagnant 2 percent growth in the "Personal Computing" segment, which includes Windows, Xbox, Bing and Surface. It's particularly surprising that Surface revenues only increased by 1 percent, given the 12 percent increase we saw last quarter. I'd expect more of a jump for the holidays, especially now that the Surface Laptop and Pro are on the market.

The quarter wasn't entirely rosey for Microsoft, though. The company posted a $6.3 billion loss, which it attributes to a $13.8 billion charge for the Tax Cuts and Jobs Act (TCJA). That figure also doesn't reflect the full accounting for that bill, which Microsoft is still in the process of calculating. Without the TCJA charge, Microsoft would have seen a profit of $7.5 billion for the quarter.

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