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Microsoft (NASDAQ: MSFT) has had a stellar run, returning over 45% in the previous 12 months, nearly four times the return of the broader market. One of the key drivers of those impressive results has been the company's success in the realm of cloud computing. While Amazon Web Services continues to be the 800-pound gorilla in the room, Microsoft has surprised some by taking up a strong second position.
Investors were watching closely when the company reported the financial results of its 2018 fiscal fourth quarter, which ended on June 30, 2018, to ensure that Microsoft continues its recent pattern of strong growth -- and they were not disappointed.
Image source: Microsoft.
The raw numbers
| Metric | Q4 2018 | Q4 2017 | Year-Over-Year Change |
|---|---|---|---|
| Revenue | $30.1 billion | $25.6 billion | 17% |
| Operating income | $10.4 billion | $7.7 billion | 35% |
| GAAP net income | $8.9 billion | $8.1 billion | 10% |
| GAAP earnings per diluted share | $1.14 | $1.03 | 11% |
Data source: Microsoft Fourth-Quarter 2018 Financial Release. Chart by author.
Microsoft reported revenue of $30.1 billion, an increase of 17% year over year, and exceeding analysts' consensus estimates of $29.21 billion. Adjusted net income of $8.3 billion resulted in adjusted earnings per share of $1.13, exceeding expectations of $1.08.
More importantly, revenue increased across the all of the company's major business segments:
| Major Business Segments | Q4 2018 | Q4 2017 | Year-Over-Year Change |
|---|---|---|---|
| Productivity and business processes | $9.7 billion | $8.6 billion | 13% |
| Intelligent cloud | $9.6 billion | $7.8 billion | 23% |
| More personal computing | $10.8 billion | $9.2 billion | 17% |
| Total revenue | $30.1 billion | $25.6 billion | 17% |
Data source: Microsoft Fourth-Quarter 2018 Financial Release. Chart by author.
There were several noteworthy items buried within the company's reporting segments. Office 365 consumer subscribers grew to 31.4 million, while commercial revenue from the office suite grew 38% year over year. Revenue from LinkedIn, the business social networking platform, increased to $1.46 billion, up 37% year over year, while engagement -- as measured by LinkedIn sessions -- grew 41%. Gaming revenue increased 39% compared to the prior-year quarter. Revenue for the Surface line of computing products increased 25%, driven by new models and low prior-year comps.
Most impressive of all was the growth in revenue from Azure, the company's cloud-computing solution, which grew 90% year over year. The company has been increasingly winning large deals like the one announced earlier this week with Walmart, to power its cloud-computing segment.