Microsoft shares have gained 23 per cent this year, topping the 17 per cent increase in the S&P 500 Index.
After beating analyst expectations with its FY19 Q3 earnings report today, Microsoft's stock surged to over $130 per share in after-hours trading, raising its market cap past $1 trillion.
Revenue rose 14% from a year earlier to US$30.6-billion in the quarter ended 31 March, the Redmond, Washington-based company said on Wednesday in a statement.
Amid a decline in its legacy Windows software business, much of Microsoft's growth in recent years has come from selling its cloud services to other businesses and governments.
Microsoft is battling Amazon for a multi-billion dollar contract to supply the USA military with cloud computing services. Nadella also said Microsoft wanted to extend its Office services to the healthcare sector to make it possible to access patient health care records more securely.
For its third fiscal quarter, which ended on March 31st, Microsoft's Intelligent Cloud division revenue was $9.7 billion, a 22 percent improvement compared to the same quarter past year. A growing proportion of Microsoft's software sales are billed as recurring subscription purchases, which are more reliable than one-time purchases. Net income was US$8.8 billion, or US$1.14 a share, compared with an average analyst estimate of US$1 a share, according to data compiled by Bloomberg.
Commercial cloud revenue was $9.6 billion in the third quarter, up 41 percent from a year ago.
Microsoft reported quarterly earnings on Wednesday afternoon.
Microsoft's so-called "intelligent cloud" unit, which contains its Azure services, posted revenue of $9.65 billion, above Wall Street estimates of $9.28 billion, according to IBES data from Refinitiv.
Meanwhile, the Productivity and Business Process division, which includes Office software and cloud platforms, trousered $10.2bn, up 14 per cent from past year. Analysts were predicting cloud revenue of $9.30 billion.
Microsoft's results on Thursday contained two weak spots.
More Personal Computing revenue was up 8 percent to $10.7 billion, with operating income up 25 percent to $3.2 billion. Based on the numbers, Microsoft is making inroads in getting more businesses to upgrade to Office 365 with its Commercial seat revenue growth up 27% per user which is also negative for the more traditional offering of Office the company provides which saw a decline of 19% as more people transition to the cloud version of Office.
Once again, Microsoft's Surface hardware is proving that it can tangle with some of the big boys in the market as it marked another revenue growth quarter to the tune of 21%.