Microsoft second-quarter revenue tops analysts’ estimates

By Dina Bass

Microsoft topped analysts’ estimates for second-quarter revenue, helped by brisk quarterly growth in its cloud and corporate-software businesses, while a tax charge caused the company to report a net loss.

The software maker said it had a $13.8bn (€11.1bn) charge related to taxes owed on overseas cash, a result of recent US tax law changes. The net loss in the second quarter, which ended December 31, was $6.27bn, or 82c a share. Excluding the charge, profit was 96c, compared with an average analyst projection of 86c.

Sales of Azure cloud-computing services almost doubled as businesses increasingly seek to run applications and store data in Microsoft’s data centres. Chief executive Satya Nadella is adding machine learning and data-analysis features to Azure, seeking to woo customers from market leader Amazon. The company is also switching more customers to online subscription versions of productivity programs like Word and Excel, helping buoy Office 365 revenue by 41%.

“Office is continuing on its merry way, moving customers to Office 365,” said Mark Moerdler, at Sanford C Bernstein & Co. “And Azure is continuing to chug along.”

Sales in the quarter climbed 12% to $28.9bn, exceeding the average analyst estimate of $28.4bn.

As of June 30, almost $128bn of the Microsoft’s cash and short-term investments were held overseas. In December, Congress passed a tax overhaul that scrapped a previous system that let companies defer US income taxes on foreign earnings until they returned that income to the US.

Now companies will have to pay taxes on accumulated foreign income -- cash at a tax rate of 15.5% and less liquid assets at a rate of 8%. Companies have eight years to pay. Microsoft hasn’t disclosed whether or when it plans to repatriate its foreign income.The company’s shares slipped less than 1% in extended trading following the report, after closing at $95.01 in New York.

Bloomberg