Microsoft reports a big beat on revenue and profit, stock jumps 8%

Phone revenue fell 49% in constant currency, while search ad revenue climbed 21% in constant currency.

The company’s net income fell to $5.00 billion, or 62 cents per share, in its second-quarter ended December 31 from $5.86 billion, or 71 cents per share, a year earlier.

The company’s combined cloud business was on track for $9.4 billion in annual revenue, the company said, up 15 percent from the $8.2 billion revenue it estimated last quarter.

Revenue was $25.69 billion, topping estimates of $25.26 billion.

Wall Street was looking for second quarter non-GAAP earnings of 71 cents a share on revenue of $25.26 billion.

The company reported a rise in unearned revenue balances of $19.8bn, up 8% in constant currencies, representing services that have been paid for up front, but not yet delivered.

Fortunately for the computing giant, its Surface, Windows 10 and cloud computing business remain strong.

This division, which includes Office and Dynamics, generated $6.7 billion, which represents a decline of 2% year over year due to currency fluctuations.

Many prefer Microsoft’s cloud infrastructure as it offers more flexibility to companies moving software about.

In addition, revenue in its Intelligent Cloud segment rose 5% to $6.3 billion, while sales in its More Personal Computing businesses decreased by 5% to $12.7 billion.

CEO Satya Nadella said business testing of Windows 10 should help the operating system to be running soon on 200 million devices.

Operations Chief Kevin Turner said Microsoft experienced a “strong holiday season”, citing growth at Xbox and Surface, which recently launched the Surface Pro 4 and Surface Book.

Despite the arrival of Windows 10, the company’s Windows OEM revenue dropped 5 percent during the quarter, but Microsoft says that it actually “outperformed the PC market, driven by higher consumer premium and mid-range device mix”. Server products and cloud services revenue grew 10%, accounting for currency fluctuations.

On the gaming side of things, Microsoft says that its Xbox Live monthly subscriber user base grew 30 percent year-over-year to 48 million.