Microsoft reports cloud success, amid shrinking PC revenue

Revenue from the company’s increasingly important “Intelligent Cloud” business, which includes products such as Windows Server and platforms such as Azure, rose 5 percent to $6.3 billion. Office 365 subscribers grew to 20.6 million, and Windows 10 is now on more than 200 million devices. The More Personal Computing division was also down 5% from last quarter.

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.

Microsoft just released its earnings report for the last quarter, and the major takeaway is that Windows Phone sales were beyond bleak, while Surface revenue performed pretty decently.

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. Microsoft has been marketing the device as a better productivity tool toward enterprise businesses.

Microsoft generates more than half of its revenue from outside the United States.

Likewise, Microsoft did not fully reveal Office 365 cloud service sales.

Microsoft Corp. continued an era of renewed vitality in the latest quarter, showing progress in newer cloud- computing services as well as in such established business lines as Windows.

Shares in Microsoft were up more than 3% to $53.43 in after-hours trading in NY and have risen 10% in the past 12 months.

Revenue fell to US$23.8 billion, down from US$26.47 billion a year ago.

Microsoft’s net income fell to $5 billion, in its second-quarter ended December 31 from $5.86 billion a year earlier.

Microsoft’s decision to focus more on cloud services – where its competitors include Amazon, Google, IBM and Cisco – has helped it move away from the declining PC market. The service revenue from the Intelligent Cloud (IC), grew from $5.9 billion to $6.4 billion over the same period.

Microsoft is going through a tough turnaround process in an even tougher market, and despite some encouraging quarterly results today, it’s not all good news. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results. On the negative side, Microsoft is suffering due to floundering personal computer business, which is hurting profits from longtime Microsoft software businesses, especially Windows, while on the positive side, the flourishing cloud business gives hopes to the investors that the company will retain its relevance at least for some years to come.