Microsoft: Satya Nadella's cloud-focused strategy bearing fruit

Microsoft's quarterly revenues beat analysts' expectations, indicating that Satya Nadella's restructuring of the company, focusing on cloud computing and mobile, is going in the right direction.

Excluding the effect of foreign exchange rate changes, revenue would have grown 9%, the company noted.

Nevertheless, net income for the third quarter ended on 31 March fell by 12% to $4.98bn, partly due to higher spending on research and development, and costs related to widespread job cuts announced earlier.

The Devices and Consumer segment, which includes various consumer-focused software and devices, saw an 8% increase in revenue during the quarter. Meanwhile, the commercial segment that includes cloud and services for businesses saw a 5% improvement in revenues.

In the consumer segment, Microsoft's Surface tablets and Lumia smartphones achieved impressive results, with Surface Pro 3-related revenues rising by 44% and Lumia sales rising by 18% to 8.6 million devices.

In the cloud division also, the company achieved strong results, with commercial cloud revenue rising 106% year over year.

Microsoft CEO Nadella earlier announced a restructuring at the firm, involving thousands of job cuts, in order to integrate Nokia's mobile business and give more focus on the cloud service, which, the company said, has strong growth potential.

"Customers continue to choose Microsoft to transform their business, and as a result we saw incredible growth across our cloud services this quarter," Nadella said in the earnings release.

"Next week at Build we're excited to share more about how we're empowering every individual and organization on the planet to achieve more with the next generation of our platforms."

"Our transformation is about delivering new value to more customers," Nadella told analysts during an earnings call. "We'll continue to push forward with big ambitions."

Analysts, who were expecting weak performance from the company, also cheered Microsoft's results.

"We would characterize these results as a big step in the right direction for Nadella and Microsoft, and it appears Microsoft is back on the right track after a head-scratching performance last quarter," said Daniel Ives, analyst at FBR Capital Markets.

"Microsoft did a great job controlling costs, showed continued growth in enterprise and was even ahead of expectations with hardware, which helped for the second quarter in a row," BGC Partners analyst Colin Gillis said.