Microsoft’s latest financials show Surface boom, Mobile collapse

Revenues were down by 10.1 per cent from $26.47bn to $23.8bn, while net income fell $5.86bn to $5bn.

Like a friendly but persistent sales rep, Microsoft has a message for anyone who owns a personal computer: If you haven’t yet upgraded to Windows 10, the company highly recommends it. Despite this, the company’s long-term focus on cloud computing is paying dividends and the company is making more money from cloud than ever before.

All of its businesses combined, Microsoft collected $25.7 billion in revenue (non-GAAP) during the quarter.

The Productivity and Business Processes division, which produces the Office suite of programmes delivered underlying growth of 5%, driven by 70% growth in revenues for the cloud-based Office 365 suite, where there are now 20.6m consumer subscribers in addition to the commercial client base.

Microsoft made $9.4 billion from cloud computing in its last quarter with the 140% rise of Azure revenue surpassing expectations and over shadowing other areas of business.

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.

Microsoft has admitted that they have sharply scaled back the ambitions of its money-losing smartphone business, acquired from Nokia. Conversely Windows Phone revenue dived dramatically, it was cut in half in constant currency, apparently following Microsoft’s cunning plans and “reflecting our strategy change announced in July 2015”.

Surface revenue is up year-over-year by 29 per cent to $1.35 billion however, and Microsoft said that’s due to the Surface Book and Surface Pro 4.

There was also good news for the company’s hugely popular games console, Xbox, with membership of its online platform Xbox Live rising by 30% to more than 48 million.

“Businesses are using the Microsoft Cloud as their digital platform to drive their transformation agendas”, said Satya Nadella, chief executive officer at Microsoft.

However, Nadella said businesses are piloting Windows 10, which he expects will drive deployments beyond 200 million active devices. Windows Continuum, which allows its mobile phones to be connected to a monitor for a PC experience powered by Windows 10, is one of the features the company is banking on.