Commercial cloud boom sees Microsoft shares soar

Wall Street impressed by Nadella's first few months at the top despite sales and profit being down on last year

Microsoft shares rose last night as new chief executive Satya Nadella impressed investors on an earnings call – marking the first time the company's boss has joined one in five years.

Both sales and net profit at the software giant were down annually, but shares still climbed between two and three per cent in after-hours trading, according to Reuters.

For its third quarter, which ended on 31 March, net income fell 6.5 per cent year on year to $5.66bn (£3.37bn) on revenue which stumbled 0.4 per cent to $20.4bn – although this figure was marginally ahead of analyst estimates of $20.39bn.

Commercial revenue at the software giant was up seven per cent annually to $12.23bn, driven by a cloud boom. Office 365 revenue grew more than 100 per cent year on year and commercial seats nearly doubled over the same period while sales of its Azure business cloud platform grew by more than 150 per cent.

Microsoft's chief financial officer Amy Hood said its commercial growth exceeded that of the wider enterprise IT market in its third quarter.

"Customer movement from transactional purchasing to subscriptions and multi-year agreements was better than our expectations," she said on an earnings call transcribed by Seeking Alpha.

"We had double-digit growth in SQL, System Centre, Windows Server Premium and Lync. Our commercial results reflect ongoing strength and we again outperformed the enterprise IT market."

New boss Nadella took over in February and marked his first earnings call – which his predecessor Steve Ballmer usually skipped – to update investors on his first few months in the role.

"In addition to executing on our plan and announcing new products and services, I have spent a lot of time gathering feedback and exchanging ideas with customers, partners, employees and investors," he said. "It is important and valuable to see the company with a fresh perspective.

"The past two and a half months have been a period of significant change at Microsoft, but also a period of nailing the basics and delivering against our product and financial plans. In the months ahead, we will continue to be intensely focused on two things: rock-solid execution and pivoting the company towards the future."