Cloud now makes up one third of Microsoft revenues as Azure soars

Analysts surveyed by Thomson Reuters were expecting an adjusted profit of 71 cents a share for the quarter, the second of the company’s fiscal year.

During the quarter, Microsoft returned $6.5 billion to shareholders in the form of share repurchases and dividends.

Software offered as a service in the Internet cloud has been a key aspect of the technology veteran’s effort to adapt to a shift away from packaged software on which the USA company was built.

Last quarter, Microsoft started reporting earnings by breaking down its results into three operating groups, plus a “Corporate and Other” section.

Almost 30 percent of search revenue in December was driven by Windows 10. Same goes for Office 365, which falls under the umbrella productivity category that drew $6.7 billion in revenue (a 2% decrease). The company now claims 20.6 million subscribers to its Office 365 Consumer subscription base.

Office 365 revenue growth was almost 70 percent in constant currency.

“They nailed the cloud”, said Matt Howard, a venture capitalist at Norwest Ventures who monitors Microsoft closely. The Intelligent Cloud (IC) business, which includes service revenue and Enterprise Services, generated $6.4 billion, compared with $5.9 billion in the third quarter, more of what analysts want to see.

Benedict Evans, a partner at VC firm Andreessen Horowitz, made a chart that shows all sales of Windows Phones over time and it shows just how brutally the business has failed.

CEO Satya Nadella has focused on cloud services and mobile applications on slower growth in its traditional software business. “Businesses are also piloting Windows 10, which will drive deployments beyond 200 million active devices”.

The company’s phone revenue plummeted 49 percent when excluding foreign currency fluctuations as a result of the changes, which included cutting the number of smartphones it sells.

Microsoft Surface revenue was up 29% year on year, totalling $1.35 billion (about £94m, AU$1.91bn). Even with the recent issues in the stock market, Microsoft’s shares are up more than 28 percent compared to the last season, while shares in rivals like Apple, Oracle and IBM have declined by double digits.