Microsoft's (MSFT) most recent quarterly results are showing more signs that Chief Executive Satya Nadella's focus on cloud-based services is reinvigorating the tech giant after years of treading water in the software market.
Evidence of that could be found Thursday in what Microsoft calls its "intelligent cloud" offerings, which rose 8% from a year ago to bring in $5.9 billion in revenue during its fiscal first quarter. Intelligent cloud includes Microsoft's server and Azure cloud services, as well as the company's mobile enterprise business.
"Azure has been years in the making, and it's now a time where businesses are moving more data to the cloud," said Kim Forrest, vice president and senior equity analyst at Fort Pitt Capital Group. "Microsoft benefited from consumers buying PCs, but the company has always been mostly focused on the enterprise."
Forrest, who serves as an assistant manager for the $50 million Fort Pitt Capital Total Return Fund (FPCGX) , said Microsoft makes up 3.73% of the fund's holdings.
The strength of its cloud business helped Microsoft report a profit of 57 cents a share on revenue of $21.7 billion. Excluding one-time items, Microsoft earned 67 cents a share, while analysts surveyed by Thomson Reuters had forecast the company to earn 58 cents a share on $20.9 billion in sales.
"Satya Nadella, the breakout CEO of Microsoft, put it best when he said that he is trying to make Microsoft's products ones that you want, not just need," said TheStreet's Jim Cramer, Portfolio Manager of the Action Alerts PLUS Charitable Trust Portfolio. "He's doing it."
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The overall results and outlook were enough to give investors a degree of faith in Microsoft that had not been seen in more than 15 years. On Friday, Microsoft shares surged 11% to trade at $53.20; the stock price has risen more than 46% since Nadella became CEO in February 2014.
Some analysts said by focusing on the cloud, Microsoft is finding a way to buck the negative reports coming out of some of the other software titans.
"Nadella's cloud vision is translating into success in the field," said FBR analyst Daniel Ives. "This quarter was a stark contrast to the dark days we are seeing at other traditional IT stalwarts such as Oracle (ORCL) , IBM (IBM) and HP (HPQ) ." Ives has an outperform rating and a $60 price target on Microsoft shares.
Recently, Microsoft touted the success of its Windows 10 platform, noting more than 110 million devices are now running the OS. Overall sales of Windows operating systems declined by 17% from a year ago, but still contributed $9.4 billion in revenue during the quarter ended Sept. 30.
Additionally, Microsoft is expecting its strength to extend into the company's fiscal second quarter. Microsoft estimated revenue for the quarter would be in a range of $24.8 billion to $25.4 billion, while analysts earlier estimated the company would report sales of $25.1 billion for the period that ends in December.