Investing.com – Microsoft stock (NASDAQ:MSFT) traded 2.3% higher in Wednesday’s premarket as its Cloud business topped $20 billion in revenue for the first time to drive the company past analysts’ estimates for the first quarter.
Microsoft Cloud generated 36% more revenue on-year to touch $20.7 billion as clients like GE Healthcare (NYSE:GE) and Procter & Gamble (NYSE:PG) migrated critical workloads to its Cloud platform led by Azure. Azure revenue grew more than 50%. Without the impact of an accounting change, gross margin in the segment would have widened by 4 percentage points instead of narrowing slightly to 71%.
The Cloud business of Microsoft and rivals Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOGL) has boomed as more people asked for on-demand digital services during the pandemic, accelerating the shift of corporates to a hybrid model.
Microsoft's revenue from selling Windows to PC makers grew 10% year over year, easily surpassing the overall PC market, which grew about 4% because of supply constraints, according to data from IDC.
Microsoft 365 subscription growth drove Office consumer results. Advertising market growth drove another strong quarter in LinkedIn as well as Search and News advertising by 40% excluding traffic acquisition costs, the company said.
The company continues to persuade more customers to pay up for its more premium services that offer enhanced feature-loaded apps and security and they are responding. Sales of Office 365 to business customers rose 23%.
Xbox content and services revenue rose 2% while Surface sales declined 18% as lack of semiconductors held back sales of devices. Surface sales could further erode in the ongoing quarter, the company said, citing persistence of supply issues.
Overall, Microsoft’s first-quarter revenue jumped 22% to $45.3 billion. Adjusted profit per share rose 25% to $2.27.
Microsoft said Azure will continue to drive revenue growth. Intelligent Cloud sales are seen between $18.1 billion and $18.35 billion in the second quarter, after notching up $17 billion July-September.
In ‘More Personal Computing’ comprising Windows, Office 365, LinkedIn and other consumer-facing businesses, the company expects revenue of $16.55 billion at midpoint in the current quarter.