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Microsoft today reported earnings for its second fiscal quarter of 2018, including revenue of $28.9 billion, net income of $7.5 billion, and earnings per share of $0.96 (compared to revenue of $26.1 billion, net income of $6.5 billion, and earnings per share of $0.83 in Q2 2017). All three of the company’s operating groups saw growth. The quarter’s results also included a net charge of $13.8 billion due to the Tax Cuts and Jobs Act.

Analysts had expected Microsoft to earn $28.39 billion in revenue and earnings per share of $0.86. In short, the company beat expectations. The company’s stock was up 2.45 percent in regular trading, but largely flat in after-hours trading. Microsoft said it returned $5 billion to shareholders in the form of share repurchases and dividends during the quarter.

“This quarter’s results speak to the differentiated value we are delivering to customers across our productivity solutions and as the hybrid cloud provider of choice,” Microsoft CEO Satya Nadella said in a statement. “Our investments in IoT, data, and AI services across cloud and the edge position us to further accelerate growth.”

Last quarter, Microsoft’s cloud annualized run rate passed $20 billion, ahead of schedule. Nadella’s plan to turn Microsoft into a cloud company is working.

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Here are the highlights across the company’s three operating groups:

  • Productivity and Business Processes: Up 25 percent to $9.0 billion. Office commercial revenue grew 10 percent, Office consumer revenue was up 12 percent, and Dynamics revenue increased 10 percent. Office 365 subscribers hit 29.2 million. LinkedIn contributed revenue of $1.3 billion.
  • Intelligent Cloud: Up 15 percent to $7.8 billion. Server products and cloud services revenue grew 18 percent while Enterprise Services revenue increased 5 percent. But the big number as always was Azure revenue, which grew 98 percent.
  • More Personal Computing: Up 2 percent at $12.2 billion. Windows OEM revenue was up 4 percent while Windows commercial revenue increased 4 percent. Search acquisition advertising revenue minus traffic acquisition costs jumped 15 percent. Surface revenue increased by 1 percent, and gaming revenue was up 8 percent (driven largely by the Xbox One X).

The fact that Surface revenue is flat is surprising. The Surface Laptop helped the company in the previous quarter, but it looks like the Surface Book 2 didn’t make much of a dent. That said, the current quarter will give us a full three months of sales, so we’ll be able to make a better call in Q3 2018.

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