Microsoft soars after bumper results

Shares rise to all-time high; legacy software business, cloud service spur growth

Microsoft Corp. shares rose about 5% to an all-time high on Friday, after investors cheered another blockbuster quarter, backed by growth in its legacy software business and Azure cloud computing services.

Shares of one of the technology world’s oldest and best-known names rose almost 4% to $108.20 in early trade, adding more than $30 billion to a market capitalisation that was already $802 billion at Thursday’s close.

Brokerages bullish

At least six brokerages raised their price targets on the stock after the results.

Helped by a boom in demand for cloud-based software, Microsoft has more than doubled in value since Satya Nadella took over as chief executive in 2014 and refocused the software behemoth on newer businesses.

While Microsoft’s core productivity and business processes unit, which includes the Office 365 software suite, rose 13.1% to $9.67 billion, revenue for the Azure cloud service jumped 89%.

“Based on the results, they were able to beat on all major metrics that people were focusing on. I don’t see anything that should raise an eyebrow of concern”, said Daniel Morgan, a portfolio manager at Synovus Trust.

Microsoft has been investing heavily to bolster the fast-growing cloud business and catch up with market leader Amazon.com’s Amazon Web Services (AWS).

“Given the competitive market and need to invest in both capex and operating expenses, profitability along AWS’s level may prove elusive for Azure for several years, if not forever,” Jefferies analysts said.

According to research firm Canalys, AWS is beating the competition in terms of market share, followed by Microsoft, which continues to grow faster than AWS, as of April this year. Google was ranked third.

“Our early investments in the intelligent cloud and intelligent edge are paying off, and we will continue to expand our reach in large and growing markets with differentiated innovation,” Mr. Nadella said on a conference call on Thursday.

Analysts expect the investments to pay off in the long run, allowing Microsoft to rival Apple and Amazon in the race to be the first company worth $1 trillion.

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