Microsoft () - shares rose Wednesday as the IT giant forecasted stronger-than-expected revenue growth for its major divisions, offsetting concerns over the pace of rises in its Azure cloud offering.
Revenues for Microsoft's Intelligent Cloud division, which houses Azure, would likely rise to $21.1 billion and $21.35 billion for the current quarter, with double-digit percentage gains in the next fiscal year.
Azure's flagship cloud offering increased 46% from last year, but dropped to the December quarter, boosting overall group sale by 18% to a new high of $49.4 billion for the three months ending in March, according to the Street consensus forecast.
"We're increasing our tier one infrastructure workloads, and leaders in every industry, from Blackrock to Bridgestone, are all moving mission-critical workloads to Azure," CEO Satya Nadella said on a conference call late Tuesday. "Overall, we're seeing larger more strategic Azure commitments from industry leaders including Boeing, Kraft, Heinz, U.S. Bank, and Westpac, who all chose our cloud to accelerate their digital transformations."
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"If there is a macro stalemate, where you have more value for less, makes you win," he said. "And in our case, when it comes to our commercial cloud offerings, we have significant advantages on that across the stack."
Microsoft's stock was marked 5.5 percent higher in pre-market trading, indicating a $284.80 opening bell price.
Productivity and business processes division revenues rose 17% to $15.8 billion, according to Microsoft, while Intelligent Cloud revenues increased by 26% to $19.1 billion. More Personal Computing revenues increased 11% to $14.5 billion.
"Microsoft's performance, guidance, and tone were disappointing for Microsoft shares, and they might also modestly help alleviate widespread macro fears for software investors more broadly," said BMO Capital Markets analyst Keith Bachman, who has received a $345 price target.
"We would not consider Microsoft as inexpensive in comparison to low double-digit growth, but we nevertheless aim the shares given the wide source of revenue and core franchises, which we believe will continue to generate long-term free cash flow," he added.
