Microsoft profits fall but cloud success sends share price up

“Businesses are also piloting Windows 10, which will drive deployments beyond 200 million active devices”, the Indian-born top executive added.

“Businesses everywhere are using the Microsoft Cloud as their digital platform to drive their ambitious transformation agendas”, said Satya Nadella (pictured), Microsoft’s CEO, in a statement.

Perhaps a better indicator of its cloud strength is what the company calls its combined cloud business, on track for $9.4bn in annual revenue, the company said.

The Intelligent Cloud business improved by 5 percent, Microsoft says, with server products and Azure growing 10 percent and 140 percent, respectively.

Revenue in Microsoft’s productivity and business processes unit, which includes Office commercial products, rose 5% on a constant-currency basis.

Looking at Microsoft’s “More Personal Computing” segment which envelopes all its consumer hardware, a five per cent revenue decline was experienced in FY16 Q2.

Office 365, the company’s subscription-based productivity service also saw a revenue growth of 70%, with subscribers increasing to more than 20 million.

Microsoft broke with tradition past year by releasing Windows 10 as a free upgrade for older PCs, with no charge for future updates.

In all for the period ended December 31, Microsoft reported a profit of $5 billion, or 62 cents a share, down from $5.86 billion, or 71 cents a share, a year earlier. 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.

“The enterprise cloud opportunity is massive, larger than any market we have ever participated in”, Nadella said in a conference call. The weak PC market led to a 5 percent fall in Windows OEM revenue at constant exchange rates, and revenue from mobile phones fell 49 percent. In other words, Microsoft’s new strategy to focus on just 3 phone categories and rely on universal apps for Windows 10 Mobile is the main reason for this drop, and the company kind of expected it.

Microsoft exceeded Wall Street’s forecasts for its fiscal 2106 second quarter Thursday, with Azure, Office 365 and Surface products all continuing to see healthy sales growth.