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Intelligent Cloud, Azure Helped Lift Microsoft

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Shares of Microsoft (MSFT - Free Report) climbed in after-hours trading on Thursday after the company reported strong quarterly earnings results. But aside from the tech giant’s top and bottom line beats, investors need to understand how its specific business units performed during Microsoft’s fiscal third quarter.

Microsoft posted adjusted quarterly earnings of $0.95 per share and overall revenues of $26.82 billion, both of which beat our Zacks Consensus Estimates. Both also marked year-over-year gains of 36% and 16%, respectively, which are hardly insignificant for a company of its size and age.

Still, investors need to focus on the company’s individual business segments as Microsoft tries to expand far beyond personal computers and related software into growth areas such as artificial intelligence. This expansion is expected to help Microsoft better compete with the likes of Amazon (AMZN - Free Report) , Oracle (ORCL - Free Report) , and Google parent Alphabet (GOOGL - Free Report) going forward.

With that said, Microsoft’s Intelligent Cloud unit is one of the company’s fastest growing and most important businesses. 

Intelligent Cloud

Microsoft’s Intelligent Cloud unit contains its server and enterprise products, including the quickly growing Azure segment. Our exclusive Zacks non-financial metrics consensus estimate file called for quarterly Intelligent Cloud revenues to climb roughly 14% to hit $7.70 billion.

Intelligent Cloud revenue actually climbed 17% to reach $7.79 billion. The unit’s server products and cloud services revenue popped 20% from the year-ago period, while enterprise services revenue rose 8%. Investors should also be pleased to note that Azure revenue soared 93%, after skyrocketing 98% last quarter.

For the first nine months of Microsoft’s current fiscal year, Intelligent Cloud revenues are up over 15% to $22.61 billion. This key business unit is likely to become even more valuable going forward as cloud computing counties to proliferate.

It is also worth noting that Microsoft’s other two key business units, Productivity & Business Processes and More Personal Computing, both topped our NFM consensus estimates.

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