Microsoft shares hit high as cloud business flies above estimates

Thu Oct 20, 2016 7:59pm EDT
 
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By Anya George Tharakan and Jeffrey Dastin

(Reuters) - Microsoft Corp said sales of its flagship cloud product doubled in its first quarter, propelling earnings above analysts' estimates and sending its shares to an all-time high, breaking past a level hit in 1999 at the peak of the tech stock bubble.

The company's shares have doubled since August 2013 with Chief Executive Satya Nadella restoring investor confidence by focusing on mobile and cloud computing rather than PCs.

Long known for its Windows software, Microsoft has shifted focus to the cloud where it is dueling with larger rival Amazon.com Inc to control the still fledgling market. Its jump in revenue underscores how businesses around the world are turning to new applications in the cloud and leaving once critical software programs and other hardware in the dust.

Shares of Microsoft rose as much as 6.2 percent to $60.79 in after-hours trading. They later pared gains to $60.43, still adding nearly $25 billion to its market value.

The Redmond, Washington-based company said sales from its flagship cloud product Azure, which businesses can use to host their websites, apps or data, rose 116 percent. Revenue for its broader "Intelligent Cloud" business rose 8.3 percent to $6.38 billion, beating analysts' average estimate of $6.27 billion, according to research firm FactSet StreetAccount.

"We are not just building or moving (clients') IT," Nadella said on an analyst call. Customers "are building new digital services for hyper scale. And that's what is probably unique in terms of what has changed year over year for us.

"It's not just the Silicon Valley startups anymore; it is the core enterprise that is also becoming a digital company. And we are well-positioned to serve them," he said.

The company forecast that sales for its Intelligent Cloud business will be between $6.55 billion and $6.75 billion in the current quarter, compared with $6.34 billion in the same period a year earlier.   Continued...

 
The logo of Microsoft is pictured in Issy-les-Moulineaux, France, August 8, 2016. REUTERS/Jacky Naegelen/File Photo