Microsoft Corporation Stock Surges After Earnings Beat

This marks the first quarter that the US-based company reports its financial results based on three operating divisions as it aims to emphasise its mobile and cloud businesses.

Microsoft today reported its earnings for the first quarter of its fiscal 2016, including revenue of $21.66 billion and earnings per share of $0.67.

The United States tech giant said third-quarter profit edged up 2 percent to US$4.6 billion, while revenue dipped 12 percent to US$23.2 billion, hit by currency movements. Nomura Securities analyst Frederick Grieb said this will be “the first quarter with Windows 10 revenue deferrals, given the release of Windows 10 on July 29th”.

Excluding certain items, the company posted a net income of $5.4 billion, or 67 cents per share, on revenue of $21.4 billion. Profits grew 11 per cent year on year if you use “constant currency” for comparisons but due to exchange fluctuations the GAAP profit amount was up just two per cent. Azure revenue and compute usage in particular more than doubled year-over-year. It includes all its data center enterprise software like Windows Server, and cloud-based services like Azure.

The company’s Productivity and Business Processes revenue declined 3 percent, despite Office commercial products and cloud services revenue growing 5 percent and Office 365 revenue growing nearly 70 percent.

Revenue from the company’s Intelligent Cloud business grew 8% – up 14% in constant currency – to $5.9 billion, Microsoft said during its earnings call on Thursday. Xbox Live added 28% more members to its ranks. However, Kevin Turner, Microsoft’s chief operating officer, indicated in Microsoft’s announcement that Microsoft had a “70 percent year-over-year growth in our commercial cloud run rate”.

Windows OEM revenue also declined by 6 percent, while the search business increased by 29 percent, which is living proof that Microsoft’s commitment to the search business is going in the right direction.

Revenue from its mobile phone operations slumped 54 per cent from a year ago as it cut back on its handset business acquired from Nokia.

Microsoft CEO Satya Nadella says “customer excitement” for his firm’s Windows 10 and cloud services is up. Sales in its smartphone business tumbled a stunning 54%, which the company said was part of its strategy to streamline its phone offerings. The Surface sales probably were also dampened by buyers waiting for the October. 6 announcement of the new Surface Pro 4 tablet and Surface Book laptop.