Microsoft quarterly profit slips but tops expectations

Yesterday Microsoft released the figures for its quarter ending on December 31, 2015 (Q2 in its 2016 financial year).

Microsoft Azure cloud business – which competes head-on with the Amazon Web Services juggernaut – grew 140% from the same quarter in 2014, in constant currency.

That measure, which includes Azure plus other businesses like Office 365, is up 15 per cent from the $8.2 billion revenue it estimated last quarter.

This division covers Microsoft’s Office productivity tools, including Office 365 and the Dynamics business software lines, where Office consumer revenue declined by 14 percent, or eight percent in constant currency.

Microsoft reports in three segments, the largest being More Personal Computing, which is the division that produces the core Windows operating system and the Xbox video gaming system.

Microsoft continued to feel the impact of its changed phone strategy, with revenue from phone sales declining 53 percent year over year.

On a constant currency basis, quarterly revenue increased by 3% on a non-GAAP basis.

Overall, Microsoft saw its revenue fall two per cent to $25.7 billion (£17.8 billion), with net income up eight per cent to $6.2 billion (£4.34 billion).

Windows remains the dominant PC platform but Microsoft has lagged rivals Apple and Google to power mobile devices such as tablets and smartphones. Office 365 now has 20.6 million subscribers. Revenues declined 1.7% from a year ago to $25.69 billion.

Nadella also shared that Windows 10 was now powering more than 200 million devices, a number that Microsoft hopes will hit $1 billion in the next few years.

Revenue in Intelligent Cloud grew 5 percent to $6.3 billion.

In terms of devices, Surface sales increased strongly, with revenues up by 29 per cent following the launch of the Surface Pro 4 and Surface Book.

‘Our commercial business executed well as our sales teams and partners helped customers realize the value of Microsoft’s cloud technologies’.

Microsoft’s CEO Satya Nadella says that the company expects a strong next quarter, specifically thanks to Windows 10, as businesses are now looking into the operating system and piloting it for further deployment.