Last Thursday Microsoft (NASDAQ: MSFT) reported its third quarter financials for fiscal year 2017 for the period ended March 31, 2017. The company reported revenue of $22.1 billion GAAP, operating income of $5.6 billion GAAP, net income of $4.8 billion GAAP, diluted earnings per share of $0.61 GAAP, and a commercial cloud annualized revenue run rate over $15.2 billion. Microsoft returned $4.6 billion to shareholders in the form of share repurchases and dividends in the third quarter.

“Our results this quarter reflect the trust customers are placing in the Microsoft Cloud,” said Microsoft CEO Satya Nadella in a statement. “From large multi-nationals to small and medium businesses to non-profits all over the world, organizations are using Microsoft’s cloud platforms to power their digital transformation.”

Other financial highlights include:

• Revenue in Productivity and Business Processes was $8.0 billion, a 22 percent increase.
• Office commercial products and cloud services revenue increased 7 percent, driven by Office 365 commercial revenue growth of 45 percent.
• Office consumer products and cloud services revenue increased 15 percent, and Office 365 consumer subscribers increased to 26.2 million.
• Dynamic products and cloud services revenue grew 10 percent, driven by Dynamics 365 revenue growth of 81 percent.
• LinkedIn contributed revenue of $975 million.
• Revenue in Intelligent Cloud was $6.8 billion, an 11 percent increase.
• Server products and cloud services revenue increased 15 percent, driven by Azure revenue growth of 93 percent.
• Enterprise Services revenue decreased 1 percent with declines in customer support agreements offset by growth in Premier Support Services and consulting.
• Revenue in More Personal Computing was $8.8 billion, a 7 percent decrease, driven by lower phone revenue.
• Windows OEM revenue increased 5 percent.
• Windows commercial products and cloud services revenue increased 6 percent.
• Surface revenue decreased 26 percent.
• Search advertising revenue, excluding traffic acquisition costs, increased 8 percent.
• Gaming revenue increased 4 percent.

“Strong execution and demand for our cloud-based services drove our commercial cloud annualized revenue run rate to more than $15.2 billion,” added Amy Hood, executive vice president and CFO at Microsoft.

Operational highlights include:

• Office 365 commercial hit a major milestone with 100 million monthly active users.
• Office 365 commercial seats grew 35 percent and revenue grew 45 percent year-over-year.
• In Q3, Microsoft Teams was made available to Office 365 in 181 markets.
• Microsoft redesigned the LinkedIn desktop for a more seamless, intuitive experience across devices, including a curated news feed.
• LinkedIn engagement sessions are up more than 20 percent.
• LinkedIn exceeded 500 million members.
• LinkedIn’s job platform hit a record with more than 10 million jobs posted.
• Microsoft is integrating LinkedIn products with its own for more robust applications for employers and sales staff.
• The Xbox One and Live communities are up 13 percent with 52 million active users in Q3.

“I’m proud of the progress this quarter and I’m enthusiastic about what’s to come. In the coming weeks, we will share more about how Microsoft is innovating uniquely to empower every customer – from students and teachers, to business professionals to developers,” Nadella said in the earnings call.

Hood offered the following outlook for the fourth quarter of fiscal year 2017:

• Unearned revenue between $26.8 billion and $27 billion
• Productivity and Business Processes: revenue of $8.2 billion to $8.4 billion, LinkedIn revenue of approximately $10.5 billion
• Intelligent Cloud revenue between $7.2 billion and $7.4 billion
• More Personal Computing revenue between $8.4 billion to $8.7 billion
• Operating expenses between $9.1 billion and $9.2 billion
• Other income and expenses of approximately $150 million

Also, in the fourth quarter, Microsoft will release more information about Project Scorpio which it says will be “the most powerful console ever,” enabling a true 4K gaming experience.

Investors did not have a significant reaction to Microsoft’s earnings report. Microsoft stock closed at $68.27 on April 27 and $68.46 on April 28. Stock is up considerably from this time last year when it was $50.61 (May 2, 2016).

Insider Take:

Since Microsoft began migrating toward a subscription model, it has been experiencing success one quarter at a time, and this year’s quarter shows that it is making the most of the subscription model with growth in most business segments.

The company has also been maximizing its relationship with LinkedIn, whom it acquired in 2016. Microsoft is already improving the LinkedIn user experience and harnessing the power of LinkedIn’s Sales Navigator and other premium tools and integrating them with Microsoft products to provide more robust business solutions for its customers.

Microsoft is also seeing growth in its gaming segment. In the second quarter of fiscal year 2017, Xbox gaming revenue was down 3 percent, but this quarter it saw a 4 percent revenue increase as well as an increase in the number of active users. Microsoft is positioning itself to have a strong finish for fiscal year 2017.