Trump’s tax law takes a $13.8 billion bite from Microsoft Corp’s 4th quarter revenues

The growth in Microsoft’s Azure cloud computing service is one of the reasons why the tech giant’s shares have risen by nearly 50% in the last 12 months.

Despite Microsoft Corp’s quarterly revenues beating Wall Street’s forecast, recent changes in U.S. tax law took a one-time bite of $13.8 billion from its earnings.

Boosted by more than 90% growth in revenues from its Azure cloud computing service, which competes for market share with Amazon Web Services, Microsoft’s stock has risen by almost 50% in the last 1 year.

Many of Amazon’s customers, perhaps in the hope of not wanting to get locked down by one particular service provider, are Microsoft’s clients as well.

As per Kim Forrest, an equity analyst at Fort Pitt Capital Group, “If you’re really smart you’ll have not one provider but two” .

Ever Since Satya Nadella took the reins at Microsoft, in 2014, its cloud business, including products such as Azure, Office 365 and Dynamic 365, has emerged as major growth areas.

Revenues from its cloud segment had risen by 15.3% to $7.8 billion in its fiscal second quarter, which includes a 98% growth for Azure, against analysts’ expectation of $7.51 billion, according to Thomson Reuters I/B/E/S.

Amazon Web Services however still dominates the cloud computing market with a market share of 31.8%, with Azure, growing quickly, retaining its market share of 13.9% in the second place, as per Canalys’ 2017 estimate of the third quarter.

In the quarter ended December 31, Microsoft’s tax charge resulted in a net loss of $6.30 billion, compared to a profit of $6.27 billion, in the previous year.

“If they are the only company taking a one-time tax write off that would be disconcerting but the fact that nearly everyone is doing it implies it is not a big deal,” said Adam Sarhan, CEO of 50 Park Investments, an investment advisory service.

Revenues from Microsoft’s “more personal computing”, which includes Xbox, Windows and Surface, rose by 2.36% to $12.17 billion.

Microsoft’s revenue have risen by 12% to $28.92 billion beating analysts’ estimate of $28.40 billion.


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