Microsoft Q3 2018 Earnings Release: Azure up 93%, Dynamics 365 up 62%

Microsoft has announced the following results for the quarter ended March 31, 2018:

• Revenue was $26.8 billion and increased 16%
• Operating income was $8.3 billion and increased 23%
• Net income was $7.4 billion and increased 35%
• Diluted earnings per share was $0.95 and increased 36%

The company beat analyst expectations, with projections that it will reach $28.01 billion in revenue in Q4.

CEO Satya Nadella attributed the results to ongoing, "[innovation] across key growth categories of infrastructure, AI, productivity, and business applications to deliver differentiated value to customers."

"With consistent investment and strong sales execution, this quarter we achieved better than expected performance across all segments," said EVP and CFO Amy Hood, crediting "growth in our commercial cloud revenue."

Revenue in Productivity and Business Processes was $9.0 billion and increased 17% (up 14% in constant currency), with the following business highlights:

• Dynamics products and cloud services revenue increased 17% (up 14% in constant currency) driven by Dynamics 365 revenue growth of 65% (up 62% in constant currency)
• LinkedIn contributed a 37% increase in revenue and a sessions growth of over 30%
• Office commercial products and cloud services revenue grew 14%, powered by Office 365 commercial revenue growth of 42% (up 40% in constant currency)

The "commercial cloud" as a whole, including Azure, Dynamics 365, and Office 365 generated $6 billion in revenue in the fiscal third quarter.

While some analysts are bullish, Piper Jaffray reduced its FY2018 earnings per share estimates for Microsoft on March 29^th. After the earnings announcement, Microsoft stock dropped 2.5%. A slight sequential decrease in Azure growth from 98% to 93% may have been responsible for the modest decline.