To combat the strong dollar, Microsoft engaged in about $15 billion in currency hedging in the latest quarter, longtime Microsoft analyst Rick Sherlund said Friday.
"That's the gross value to protect against currency moves," said Nomura Securities' managing director, who made his calculations based on Microsoft filings.
The strengthening dollar was a 3 percent drag on the top and bottom lines in the quarter ended in March. But the tech giant, after the market closed Thursday, reported earnings and revenue that beat expectations.
"It was [a] less bad quarter. But they set expectations low enough that the Street was happy with the results," Sherlund told CNBC's "Squawk Box" after upgrading the stock to a buy with a $50 price target. Microsoft was trading at $46.11 a share Friday morning, up more than 6 percent from Thursday's close.
"It's not the monopoly business they used to have. But it's a business that can grow single digits in revenues," he said. "They can ... enhance earnings about 4 percent from the share buyback."
In its earnings statement, Microsoft pointed to increasing usage of its enterprise cloud service Azure, cloud-based Office 365, search engine Bing and Xbox Live gaming.
"The business is in transition to the cloud. They are now the world's biggest cloud vendor at $7.1 billion in annualized revenues, growing over 100 percent per year," Sherlund said. "But it's still small, about 8 percent of the [overall] business."
"It's unhooking from Windows and trying to let Office be the next platform for innovation of productivity," he continued. "The Windows business is about 30 percent of earnings and that's in a secular decline."
Sales of Windows software to computer manufacturers to install on new PCs fell 19 percent for the quarter.
Going forward, the Nomura analyst sees tough comparisons for Microsoft in the next two quarters. "Last year, PC sales picked up because people were upgrading. There was an end of life of Windows XP, the older operating system."
Microsoft is going aggressively after the cloud, a business that's also big for Amazon.
As part of its quarterly results late Thursday, Amazon broke out sales for its robust Web services arm for the first time—saying it's a $5 billion business.
Meanwhile, the e-commerce giant's overall loss for the quarter was in line with estimates. Revenue beat, but forward guidance was light.