Last week technology giant Microsoft (NASDAQ: MSFT) reported its third quarter fiscal year 2018 financials for the period ended March 31, 2018, posting double-digital revenue growth in most categories. Among the notable highlights were total revenue of $26.8 billion, a 16 percent increase year-over-year, operating income of $8.3 billion, a 23 percent increase and net income of $7.4 billion, a 35 percent increase, or $0.95 diluted earnings per share, a 36 percent increase.

‘Our results this quarter reflect the trust people and organizations are placing in the Microsoft Cloud,’ said Satya Nadella, Microsoft CEO, in a news release. ‘We are innovating across key growth categories of infrastructure, AI, productivity, and business applications to deliver differentiated value to customers.’

Other financial highlights for the quarter include:

• Revenue in Productivity and Business Processes was $9.0 billion, a 17 percent increase year-over-year.
• Office commercial products and cloud services revenue grew 14 percent, driven by Office 365 commercial revenue growth of 42 percent year-over-year.
• Office consumer products and cloud services revenue increased 12 percent, while Office 365 consumer subscribers grew to 30.6 million.
• LinkedIn revenue increased 37 percent, along with growth in user engagement of more than 30 percent.
• Dynamics products and cloud services revenue increased 17 percent, driven by Dynamics 365 revenue growth of 65 percent year-over-year.
• Revenue in Intelligent Cloud was $7.9 billion, a 17 percent increase.
• Server products and cloud services revenue increased 20 percent, driven by 98 percent growth in Azure revenue.
• Enterprise Services revenue increased 8 percent year-over-year.
• Revenue in Personal Computing was $9.9 billion, a 13 percent increase year-over-year.
• Windows OEM revenue grew 4 percent.
• Windows commercial products and cloud services revenue increased 21 percent, driven by growth in multi-year agreements and a mix of products with higher revenue.
• Gaming revenue grew 18 percent, driven by Xbox products and services growth of 24 percent due to the popularity of third-party games.
• Surface revenue grew 32 percent.
• Search advertising revenue grew 16 percent year-over-year, excluding the cost of traffic acquisition.
• The company reported total assets of $245.5 billion as of March 31, 2018.

In the earnings call, Nadella noted that Microsoft’s acquisition of LinkedIn will soon pass the one-year mark.

‘LinkedIn continues its strong trajectory with accelerating revenue growth and record levels of engagement – the fifth consecutive quarter of more than 20 percent sessions growth,’ Nadella said on the earnings call. ‘Appetite for conversations across the platform continues to grow – from sharing in the feed, to video, to 1:1 messages sent – all up more than 60 percent year-over-year.’

The Intelligent Cloud was a big contributor to the company’s success for the quarter, with Azure revenue growth of 98 percent. Part of this is due to the customer demand for Microsoft’s Azure Stack which made widely available a few months ago.

The company also success with its Xbox One X which was the top-selling game console for the 2017 holiday season, and the company is growing gaming subscriptions. Xbox Live now has 59 million monthly active subscribers. Also, by releasing exclusive game content on Xbox Game Pass at the same time as global releases increase that subscription’s value to gamers.

Microsoft provided the following guidance for the fourth quarter:

• In Productivity and Business Processes, revenue will range between $8.6 billion and $8.8 billion.
• In Intelligent Cloud, revenue will range between $7.55 billion and $7.75 billion with double-digit growth in server products and cloud services.
• In More Personal Computing, revenue will range between $9.1 billion and $9.4 billion.
• Operating expenses will range between $9.1 billion to $9.2 billion.

Following the release of the company’s financials on April 26, Microsoft has seen a slight uptick in its stock value. On April 25, Microsoft stock was valued at $92.31 per share. After the financials were posted the following day, the stock price inched up to $94.26 per share. As of 5:26 a.m. EDT today, Microsoft stock was valued at $95.00 per share, reflecting an overall increase of $2.69 per share.

Insider Take:

Microsoft posts another solid quarter with double-digit growth in virtually every category. Recurring revenue is playing a more significant role too, as companies and consumers transition away from perpetual licensing and toward subscription products like Office 365, Azure, Xbox Game Pass, LinkedIn and other subscription-based products. This will translate into more consistent income moving forward.