Robust cloud demand helps Microsoft offset weakness in the PC market

Strong demand for Microsoft’s cloud computing services helped the U.S. software company weather the effects of a weakening economy and a slump in the PC market in the third quarter, according to data released Tuesday.

Stamina performance has gone up Microsoft revenue rose 11 percent in the three months to the end of September to $50.1 billion, slightly beating Wall Street expectations. The company’s shares fell more than 2 percent on the news, despite the fact that its earnings per share of $2.35 were 4 cents ahead of expectations.

Profit from Microsoft Azure cloud computing the platform grew by 42 percent in the last quarter after eliminating the effects of the strengthening dollar. That was below the 46 percent reported in the previous quarter and the 43 percent that analysts had expected. Still, it largely confirmed Wall Street’s hopes that Microsoft’s cloud business will offset a sharp decline in the PC market this year.

According to Gartner, PC shipments fell 19.5 percent in the third quarter, the biggest drop since the research firm began tracking the PC market in the mid-1990s. Revenue at Microsoft’s More Personal Computing division, which includes software for Windows PCs, rose 3 percent in constant currencies to $13.3 billion.

By contrast, revenue from the Intelligent Cloud division, which includes Azure, rose 26 percent to $20.3 billion after adjusting for currency movements. Revenue at the Productivity and Business Process division, which includes Office, rose 15 percent to $16.5 billion.

A big jump in the U.S. dollar cut revenue by $2.3 billion in the latest quarter, Microsoft said. Recent results have been boosted by price increases for the Office 365 suite of productivity tools earlier this year, as well as the completion of the acquisition of Nuance, which had sales of nearly $350 million in the same period last year.