(CNN) – Microsoft’s revenue jumped 12% during its most recent quarter, but was slightly below analysts’ expectations.
Microsoft said Wednesday that its sales for the quarter ending in December hit $32.47 billion. That revenue growth was fueled in part by the company’s commercial cloud business, which surged 48% from the prior year to $9 billion.
The company’s stock fell more than 3% in after-hours trading following the quarterly report.
In recent years, Microsoft has focused on the cloud over its legacy business, Windows. The shift has put Microsoft near the front of the fast-growing cloud technology segment after years of attempting to compete in the smartphone market and online services like search.
Microsoft’s cloud service Azure competes with Amazon Web Services, also known as AWS. Wedbush analyst Daniel Ives said the two companies are in a “heated battle.”
“More enterprises and governments worldwide are spending billions in an accelerated shift to a cloud based environment,” Ives wrote in an investor note ahead of Microsoft’s earnings report, adding that the firm’s research indicates Microsoft is gaining market share against AWS.
“We believe Azure and AWS remain miles ahead of the nearest competitor, although we expect competition to meaningfully heat up as more tech giants chase this,” Ives said.
Earlier this month, Microsoft announced a deal to become Walgreens’ new cloud provider, in an effort to take on Amazon. The two companies said the move will help Walgreens obtain personalized data about its customers’ health, which will allow pharmacists to give better, customized nutrition and wellness solutions.
“Our strong commercial cloud results reflect our deep and growing partnerships with leading companies in every industry including retail, financial services, and healthcare,” Satya Nadella, CEO of Microsoft, said in a statement released with Wednesday’s earnings report.
Microsoft regained its title as the most valuable company in the world during the final quarter of 2018, in part by avoiding the recent regulatory and hardware sales troubles of its industry peers.
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