Microsoft’s Q2 earnings are hugely impressive, buoyed by cloud revenue

According to Microsoft, “Office commercial products and cloud services” revenue grew five per cent in constant currency, “driven by Office 365 revenue growth of almost 70 per cent”.

“Businesses everywhere are using the Microsoft cloud as their digital platform to drive their ambitious transformation agendas”, said Nadella, describing the enterprise cloud market opportunity as “massive” in an earnings call. The company said its Windows 10 offering, introduced last summer, earlier this month was running on 200 million computers, up from 100 million for the period ended in September, Microsoft said.

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

“Our commercial business executed well as our sales teams and partners helped customers realise the value of Microsoft’s cloud technologies”.

News of Microsoft’s strong Q2 results led to an spike in their share price during after hours trading, although CEO Satya Nadella hasn’t provided forward guidance just yet. Microsoft also did not reveal how many Xbox One consoles it sold this quarter.

On the positive, the company’s cloud business keeps growing, giving investors hope that Microsoft will remain relevant for years to come.

Windows remains the dominant PC platform but Microsoft has lagged rivals Apple and Google to power mobile devices such as tablets and smart-phones. The number of consumer Office 365 subscribers, meanwhile, increased to 20.6 million. Microsoft did not release a revenue figure for Bing, but said it expects it to “continue to grow and remain profitable”, said Amy Hood, chief financial officer at Microsoft.

Revenue in the business that includes Windows fell 5 per cent to $12.66 billion. Nadella has shifted much of Microsoft’s focus to its cloud business, a decision that appears to be propelling the company forward in spite of declining revenue this past quarter.

Microsoft’s Surface sales rebounded in the company’s fiscal 2016 second quarter ending December, thanks in part to the launch of the Surface Pro 4 tablet and the first Surface Book laptop, Microsoft reported.

Microsoft Xbox Live users grew 30% this year, to over 48 million users.