Microsoft Q4 revenue beats expectations on strong cloud growth

Microsoft sees growth thanks to cloud, but Surface and Windows Phone sales slump

Microsoft's fourth quarter revenue has surpassed analyst expectations, which the firm has largely credited to strong growth in its cloud computing services.

Microsoft announced revenues of $23.38bn for the fourth quarter on Thursday, an increase compared with the $19.9bn the firm posted in Q4 2013, and a figure that surpassed analyst expectations.

Microsoft has credited much of this to growth within its cloud division, which saw its revenues increase 147 percent during the quarter.

Satya Nadella, Microsoft's CEO, was pleased about this growth, having been keen to put cloud at the forefront of the company since he took over as CEO earlier this year.

Nadella said in a statement: "We are galvanised around our core as a productivity and platform company for the mobile-first and cloud-first world, and we are driving growth with disciplined decisions, bold innovation and focused execution.

"I'm proud that our aggressive move to the cloud is paying off - our commercial cloud revenue doubled again this year to a $4.4bn annual run rate."

While revenues beat expectations, profits for the quarter came in at $4.6bn, compared with $4.97bn in the fourth quarter 2013, which fell short of Wall Street predictions.

This is likely due to stalling hardware sales. While Microsoft didn't share much detail regarding Surface shipments, it said revenue for the division came in at $409m for the quarter, down from the $500m the company posted in Q3. This suggests sales of Microsoft's Surface 2 and Surface Pro 2 tablets are stalling, perhaps as buyers hold out for the Surface Pro 3.

Microsoft also shed some light on Windows Phone performance since its recent takeover of Nokia, and things aren't looking too good here. The firm reported Lumia sales of 5.8 million during the quarter, a 21 percent drop compared with Q4 2013. However, Microsoft notes that these sales figures account for only two of the three months during the quarter.

Financially, Nokia's device business contributed revenue of $1.99bn in the fourth quarter, but also an operating loss of $692m.

While PC sales are thought to be gaining traction, Microsoft noted a small 3 percent increase in Windows OEM revenues, which the firm credited to the end of Windows XP support in April. The firm also revealed that Office consumer revenue increased 21 percent in the fourth quarter, likely aided by the release of Office for iPad earlier this year.

Microsoft's Search division performed well, too, with advertising revenue from the company's Bing search engine growing 40 percent during the quarter, with its overall share of US search rising by 19.2 percent.

Microsoft's Q4 earnings come just days after Nadella announced 18,000 job cuts across the company, with 12,500 staff facing the axe from Microsoft's newly acquired Nokia division.