Microsoft hits $1 trillion market valuation

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Consequently, MSFT shares have easily outpaced the market, with a 3-year gain of 160 percent vs. 42 percent for the S&P 500 and YTD rally of 27.8 percent compared to 17 percent for the market benchmark.

Microsoft shares are trading near a record after rallying 34% over the past year.

Azure, Microsoft's flagship cloud product, competes with market leader Amazon Web Services to provide computing power to businesses.

But growth in the unit dipped to 73 percent in the latest reported quarter. LinkedIn, the networking site Microsoft bought in 2016, is also seeing a much faster growth rate with a revenue increase of 27 percent in the quarter.

The jump in stocks was preceded by Microsoft announcement of its fiscal third-quarter earnings of US$1.14 per share, exceeding analyst's estimates. Operating income was up 25 percent to $10.3 billion, net income up 19 percent to $8.8 billion, and earnings per share up 20 percent to $1.14.

Search advertising revenue excluding traffic acquisition costs increased 12 per cent (up 14 per cent in constant currency).

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"Demand for our cloud offerings drove commercial cloud revenue to 9.6 billion dollars this quarter, up 41 percent year-over-year", said Amy Hood, executive vice president and chief financial officer of Microsoft.

Microsoft's Windows, Xbox, and Surface segment contributed $10.7 billion in revenue, an 8 percent YoY increase, while Office, LinkedIn, and Dynamics generated $10.2 billion. As expected, the transition to delivering software as internet service was not easy, and the company had to endure a dry period as it expanded its user base. The unit rose 8% to $10.7bn in the fiscal third quarter. Its consumer-oriented Office products, meanwhile, grew just eight percent year-on-year, while its enterprise services division was the worst performer at a four percent growth.

Microsoft finished the trading day with a US$990.87 billion market capitalisation after its share price hit the US$130.51 threshold that boosted it to US$1 trillion. Office revenue increased 12 per cent year-on-year. Gross margin is the percentage of revenue remaining after accounting for the costs of goods sold.

Overall, Microsoft's quarterly revenue hit $30.6 billion, 14% more than a year ago.

Elsewhere, Microsoft's Office 365 suite, which includes products such as Excel and Word, also continues to benefit from the move to the cloud, with commercial Office 365 sales growing by 30%, officials said. Analysts surveyed by Zacks had expected $29.8 billion of revenue.