Microsoft meets expectations with $23.6B in revenue, Azure revenue up 93%

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Microsoft just reportedearnings for the last quarter. The company reported non-GAAP revenue of $23.6 billion and non-GAAP earnings per share of $0.73. Wall Streets cadre of crack analysts expected the companys earnings per share to come in at around $0.70, with revenue hitting about $23.6 billion. In the year-ago quarter, Microsoft reported earnings per share of $0.62.

Wall Street, despite getting its prediction mostly right, wasnt all that impressed by the earnings, and Microsofts stock is currently trending downby almost 2 percent in after-hours trading.

Our results this quarter reflect the trust customers are placing in the Microsoft Cloud, said Microsoft CEO Satya Nadella in the earnings announcement. From large multi-nationals to small and medium businesses to non-profits all over the world, organizations are using Microsofts cloud platforms to power their digital transformation.

Here are the highlights from todays report:

Cloud: Total revenue from Microsofts Intelligent Cloud business hit $6.8 billion this quarter. Microsoft expects its cloud-computing business tohit a $20 billion run rate by 2018. Thats up 11 percent from last year, when this number was $6.1 billion. Most importantly, though, Azure revenue was up 93 percent, a number that was driven both by increased demand for the core Azure compute services as well as Azures premium services. Azures annual run rate is now $15.2 billion, which puts it on track to hit the $20 billion run rate Microsoft has long expected to achieve by 2020.

This was also the first full quarter since Microsofts massive $26 billion acquisition of LinkedIn closed. The expectation here was that LinkedIn would contribute about $950 million to Microsofts productivity and business processes segment and those numbers for LinkedIn came in a bit higher, at $975 million.

The productivity segment tends to be dominated by revenue from products like Office and Dynamics. In total, Microsoft reported revenue of $8 billion for this group of products, compared to $6.5 billion a year ago.

As Microsofts director of investor relations Zack Moxcey told me after the earnings announcement, its worth noting that the commercial version of Office 365 now has more than 100 million users and that this business grew 45 percent year-over-year. Moxcey noted that this is driven by new customer acquisitions, but also by the fact that Microsoft is getting better at moving customers to more premium pricing levels over time.

Since launching the Surface line, Microsofts own devices have made up an increasingly important part of the companys revenue (though revenue from phones, of course, has been tanking for a few quarters now and continues to do so). The More Personal Computingsegment, which includes Windows, devices, gaming and search, reported revenue of $8.8 billion, compared to $9.5 billion a year ago. This drop in revenue was mostly driven by lower Surface revenue, which decreased by a whopping 26 percent. According to Moxcey, this decrease was largely driven by stronger price competition and the life cycle of the current product portfolio.

Other areas like Windows OEM revenue, gaming revenue and even search revenue were up by between 4 and 8 percent.

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