U.S. markets closed

Microsoft Q3 earnings: Cloud unit jumps 27% year-over-year

Daniel Howley
Technology Editor

Microsoft (MSFT) reported its Q3 2020 earnings on Wednesday, with its all-important cloud division jumping 27% year-over-year.

These are the most important numbers from the report, and what analysts were expecting as compiled by Bloomberg.

  • Revenue: $35 billion versus $33.6 billion expected

  • Earnings per share: $1.40 versus $1.28 expected

  • Intelligent Cloud: $12.3 billion, up 27% year-over-year

  • More Personal Computing: $11 billion, up 3% year-over-year

The company’s stock was up slightly in after hours trading.

In a statement, the company said it saw “minimal net impact on the total company revenue” from the coronavirus pandemic.

“Our durable business model, diversified portfolio, and differentiated technology stack position us well for what’s ahead,” CEO Satya Nadella said in the earnings release.

Microsoft’s Intelligent cloud division has been a key mover for its stock, with analysts and investors banking on the business’s continued growth as more companies move their resources to third-party cloud operators.

The segment made up roughly 35% of Microsoft’s revenue in Q3. It’s Azure business, which is a part of the Intelligent Cloud division, saw 59% revenue growth in the quarter.

In February, Microsoft announced that it would miss its Q3 2020 revenue guidance for its More Personal Computing segment, which consists of sales of its Windows software to OEM partners, as well as sales of its Surface hardware, Gaming segment and search revenue.

The company had already provided a wider than usual guidance range for the segment, which pulled in $13.2 billion in Q2 2020, due to the then-evolving coronavirus situation in China. According to a statement, however, Microsoft said its supply chain in the region was returning to normal at a slower pace than expected and that it would miss its forecasted revenue for the division.

FILE- In this May 7, 2018, file photo Microsoft CEO Satya Nadella delivers the keynote address at Build, the company's annual conference for software developers in Seattle. Microsoft Corp. reports earnings Wednesday, Oct. 24. (AP Photo/Elaine Thompson, File)

Looking forward, it’s clear that Azure and the cloud will continue to be key drivers for Microsoft. According to Wedbush analyst Dan Ives, the work from home environment much of the world is dealing with could actually serve as a catalyst for increased spending on Azure and similar platforms in the future.

“To this point, we believe Azure's cloud momentum is still in its early days of playing out within the company’s massive installed base (current environment a potential catalyst to cloud shift) and the Office 365 transition for both consumer/enterprise is providing growth tailwinds over the next few years,” he wrote in a research note.

More from Dan:

Got a tip? Email Daniel Howley at danielphowley@protonmail.com or dhowley@yahoofinance.com, and follow him on Twitter at @DanielHowley.

Follow Yahoo Finance on TwitterFacebookInstagramFlipboardSmartNewsLinkedIn, YouTube, and reddit