Cloud initiatives have become a core priority for Microsoft and the success of the transformation is important for the company to better utilise the emerging opportunities in mobile and cloud technology.
Craigs Investment Partners broker Chris Timms said despite the weaker-than-expected financial result and guidance, Craigs was maintaining its overweight recommendation on Microsoft.
"While a softer spending environment, particularly in emerging markets, may persist in the near-term, we remain impressed at the progress Microsoft has made with its cloud initiatives.''
Giving priority to the cloud would also help the company reduce its exposure to Windows, which was facing pressure from declining PC sales, he said.
"Given the strong success it has witnessed so far, we have confidence in the company's ability to maintain this momentum.''
Microsoft provided fourth-quarter guidance that was below market expectations.
The company was forecasting fourth-quarter revenue of $US21.7billion ($NZ31.2billion) to $US22.4billion, compared with expectations of $US23billion.
Mr Timms said that equated to a miss - at the mid-point - of 4.3%.
The main area of weakness was in its "intelligent cloud'' segment.
While the company expected its cloud revenues to continue to soar, its on-premises-server sales were facing problems from a softer spending environment, particularly in emerging markets.
"This part of its business is traditionally much more volatile, given sales are tied to the sale of hardware. This is consistent with recent commentary from a number of large IT vendors,'' Mr Timms said.
The migration of on-premises-server workloads to its cloud infrastructure service Azure was also likely to be weighing on revenue. Management downplayed that as being a key contributor, he said.
However, Microsoft's cloud initiatives continued to impress.
Revenue from Office 365 was up 63% and subscribers reached 22.2 million.
Dynamics CRM online subscribers more than doubled.
The annualised run rate for its commercial cloud business now exceeded $US10billon and the company was now halfway towards its 2018 financial year goal of $US20billion.
That was impressive growth considering the company broke the $US1billion mark only three years ago and it highlighted the huge transformation the company had undergone, Mr Timms said.
Continued strong growth from Microsoft Azure clearly indicated the company remained one of the leaders in the market.
Azure revenue increased 120% in constant currencies.
Management also noted revenue from premium cloud services grew by triple digits for the seventh consecutive quarter.
At its annual Build conference at the end of March, Microsoft announced several new cloud services, working aggressively to close the gap with Amazon Web Services.
Areas of focus included artificial intelligence, Internet of Things and business analytics.
Microsoft also touted its hybrid model where customers had the ability to secure their data wherever it was - on premises, in the cloud and across a vast range of services, he said.
