Microsoft Blows Out Earnings, Surprising Wall Street

Microsoft Blows Out Earnings, Surprising Wall Street

Maybe Steve Ballmer isn't setting Microsoft up to fail after all. The company reported fiscal first-quarter earnings this afternoon, and revenue rose 16%, to $18.5 billion, and net income rose 17%, to $5.24 billion, or $0.62 per share. Analysts and investors alike were shocked by the results after Wall Street forecasted revenue of $17.79 billion, and earnings of $0.53 per share.

Device and consumer business grew 4% on the back of a 47% increase in search advertising revenue. Commercial revenue was up 10% on 40% SQL Server growth, and a 103% increase in commercial cloud revenue.

Microsoft now breaks out "Devices and Consumer" businesses from "Commercial," part of a strategy shift Steve Ballmer put into place. What the quarter's numbers show is that, while consumers aren't buying new PCs or other Microsoft licenses, commercial hardware is up 37% over the past year, and commercial licensing is up 7%, showing continued demand for Windows, Office, and server solutions.

The demise of Microsoft has been overstated and, while the company has issues ahead, it also offers many services essential to doing business. That's keeping revenue growing and, if Microsoft develops a hit product in the Surface 2 or Xbox One, it's icing on the cake.

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