Microsoft’s Surface division grows in strong Q2

On the other hand, its Surface laptop/tablet hybrid, along with cloud and server growth, helped the company balance the revenue lost from offering Windows 10 to customers for free.

Microsoft made $9.4 billion from cloud computing in its last quarter with the 140% rise of Azure revenue surpassing expectations and over shadowing other areas of business.

Microsoft’s aggressive campaign to promote Windows 10 has already led to its deployment on more than 200 million devices since its July release.

Microsoft shares initially jumped more than 8% after announcing results, but gave up some of the gains and were trading up about 4% at around $54.20.

Shares of Microsoft climbed by as much as 7.89% to $56.16 per share in after-hours trades. In Q2 2015, Microsoft saw $26.5 billion in revenue and earnings of $0.71 per share.

“It was a strong holiday season for Microsoft, highlighted by Surface and Xbox”, said COO Kevin Turner.

Excluding one-time items, the company profit rose to $6.275 billion, or $0.78 per share, up from $5.790 billion, or $0.70 per share previous year.

However, profits for the three months to 31 December fell 15% to $5bn (£3.4bn) as the strong dollar and falling PC sales took their toll.

All this is in line with CEO Satya Nadella’s overall strategy of shifting the company more heavily into cloud, and this was reflected by the response of the stock market.

Revenue from Productivity & Business segment declined 2%, down to $6.7 billion, as opposed to the 3% decline in the quarter prior, as the company transitioned from software licensing to Office 365 subscriptions for clients.

Microsoft began rolling out its Windows 10 past year, aiming to revive the tech giant’s fortunes, with the new operating system that aims to be seamless across traditional computers and mobile devices such as tablets and smartphones. Microsoft said this was driven by the launch of the new Surface Pro 4 and Surface Book laptop towards the end of the year.

Microsoft’s gaming and digital content business reported similar growth, with Xbox Live monthly active users growing 30% year-on-year in the quarter to a record 48 million.

On the flip side, Microsoft’s phone division is tanking.

“They nailed the cloud”, said Matt Howard, a venture capitalist at Norwest Ventures who monitors Microsoft closely.