Microsoft Azure revenue doubles while Windows falls

Microsoft reported better-than-expected quarterly adjusted revenue for the ninth quarter in a row, boosted by burgeoning demand for its cloud products, sending it shares soaring in after-hours trading.

Under chief executive Satya Nadella, Microsoft has been shifting its focus to software and cloud services as demand for the Windows operating system slows in a weak PC market.

"The Nadella strategy is working and you are seeing the results in the quarter," Bernstein analyst Mark Moerdler said.

The company's shares were up 7.3 percent in after-hours trading on Thursday US time.

The results were the first under a new reporting structure that reduced reporting segments to three from six to help the software giant show off its growing cloud and mobile businesses.

First-quarter revenue from Microsoft's Intelligent Cloud business, which includes server products such as Windows Server and cloud-based platforms such as Azure, rose 8 percent to US$5.9 billion. Azure revenue alone more than doubled.

Excluding the impact of the strong dollar, revenue in the business rose 14 percent. The cloud business accounted for about 29 percent of revenue in the quarter.

"It is a really strong quarter and these guys are ahead of most of the traditional software companies moving to the cloud in terms of where they are in the evolution," Moerdler said.

The company said Office 365, another key cloud-based offering, had about 18.2 million consumer subscribers at the end of its first quarter, an increase of about 3 million from the end of the preceding quarter.

Microsoft launched Windows 10, its first new operating system in almost three years, in July. The system, seen as critical for the company, won positive reviews for its user-friendly and feature-packed interface.

Sales of Windows to computer manufacturers fell 6 percent in the quarter, Microsoft said. Research firm Gartner said PC shipments declined 7.7 percent in the quarter.

Revenue in the company's "More Personal Computing" business, which includes the Windows operating system, fell 17 percent to US$9.4 billion. Excluding the impact of the strong dollar, revenue fell 13 percent.

Surface revenue decreased US$236 million or 26 percent, which Microsoft attributed to the release of Surface Pro 3 in June 2014.

The business accounted for about 46 percent of total revenue.

The company got about 54 percent of its total revenue from outside the United States in its fiscal year 2015.

Net income rose to US$4.62 billion, or 57 cents per share, in the three months ended Sept. 30, from US$4.54 billion, or 54 cents per share, a year earlier.

Excluding items, the company earned 67 cents per share.

Adjusted revenue fell to US$21.66 billion from US$23.20 billion. Analysts on average were expecting revenue to fall to US$21.03 billion, according to Thomson Reuters I/B/E/S.

(Reporting by Devika Krishna Kumar and Arathy S Nair in Bengaluru; Editing by Savio D'Souza)