Microsoft’s Cloud Transition On Track

Microsoft has announced earnings for its second fiscal 2016 quarter, which ended December 31, 2015.

Revenue from Azure – Microsoft’s platform that sells data- center based computing power and services – more than doubled as customers signed up for pricier offerings that can handle machine learning and process large reams of information. 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. That measure, which includes Azure plus other businesses such as Office 365, is up 15% from the $8.2bn revenue it estimated last quarter. Sales tanked by 49 per cent compared to the same quarter a year earlier, with Microsoft selling only 4.5 million Lumia phones – mostly at the low end – and the company’s market share falling to just over one per cent by our guestimates. Same goes for Office 365, which falls under the umbrella productivity category that drew $6.7 billion in revenue (a 2% decrease). Server products and cloud services revenue grew 10%, accounting for currency fluctuations. The service brought in $2.4 billion in revenue, up 69% from previous year. Windows 10 adoption continues to outstrip expectations, with roughly 200 million devices running the operating system.

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

Microsoft claimed that Azure revenue grew by 140 per cent in constant currency, “with revenue from Azure premium services growing by almost three times, year-over-year”.

“They nailed the cloud”, said Matt Howard, a venture capitalist at Norwest Ventures who monitors Microsoft closely. Though that’s down from $26.1 billion in the same quarter a year prior, Microsoft increased its quarterly profits by 8 percent to $6.3 billion, up from $5.8 billion. Revenue was down 10 percent from a year ago, but after adjusting for deferred revenue, the numbers were better than Wall Street analysts expected. Search revenue was up 21 percent, while Xbox Live subscriptions rose by 30 percent.

Microsoft also saw a boost with its Surface tablet and the Xbox game console in the holiday quarter.