Microsoft Cloud Business-Expectations were high going into Microsoft‘s (NASDAQ:MSFT) earnings report. The company has stubbornly clung to its $1 trillion market cap, a watermark it achieved earlier this year. Microsoft has consistently gained market share in the competitive cloud computing arena, which has helped drive its stock up nearly 40% in 2019.
Microsoft once again cited its cloud business as a significant contributor to its success this quarter. For the fiscal 2020 first quarter (which ended Sept. 30), the tech giant reported revenue of $33.1 billion, up 14% year over year, sailing past the high end of management’s guidance, which topped out at $32.4 billion. The results also surpassed analysts’ consensus estimates of $32.4 billion. Operating income grew by 27% to $12.7 billion. This resulted in diluted earnings per share of $1.38, which climbed 21%, easily surpassing expectations of $1.24.
A beat in every major segment
Microsoft delivered growth that exceeded its guidance in each of its major business segments, positioning the company for the blowout quarter.
Productivity and business processes produced revenue of $11.1 billion, up 13% year over year and 15% in constant currency. Within the segment, Office commercial products and cloud services increased 13% year over year as Office 365 commercial revenue climbed 25%. LinkedIn continued its impressive growth, with revenue that grew 25% compared with the prior-year quarter, again reaching record levels of engagement as sessions grew by 22%. Dynamics revenue increased 14%, driven by Dynamics 365, which grew 41% year over year.
Intelligent cloud revenue again delivered the most dramatic segment growth, to $10.8 billion, up 27% year over year and 29% in constant currency. This was driven higher by on-premises server products, and cloud services revenue grew 30% year over year, with Azure cloud revenue growing by 59%. Enterprise services revenue grew a more muted 7% year over year.
The More Personal Computing segment produced more modest growth, to $11.1 billion, an increase of 4% year over year and 5% in constant currency. The highlight was performance by Windows OEM Pro, which grew 19% compared to the prior-year quarter. There was healthy demand for Windows Commercial products and cloud services, which grew by 26% year over year or 29% in constant currency. Gaming revenue disappointed, falling 7%, the result of slower console sales.