Since assuming the CEO role in February 2014, Microsoft CEO Satya Nadella has been pushing the company to adapt to a world where people are increasingly using mobile gadgets in addition to PCs, and where businesses are moving more of their operations online.
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(For those scoring at home, Microsoft’s sales figures include $1.9 billion revenue that it has deferred for accounting purposes, related to sales of Windows 10 and Halo 5).
Microsoft’s overall revenue fell to $25.7 billion, partly due to the company dialing back its failed smartphone business last summer.
Revenue in Microsoft’s productivity and business processes unit, which includes Office commercial products, rose 5% on a constant-currency basis. Office commercial products and cloud services revenue grew 5 percent with Office 365 revenue growth of almost 70 percent.
Microsoft’s aggressive campaign to promote Windows 10 has already led to its deployment on more than 200 million devices since its July release.
Rather than booking revenue from sales of its operating system up front, Microsoft records it gradually along with deferred revenue generated by the product.
‘It was a strong holiday season for Microsoft highlighted by Surface and Xbox, ‘ said chief operating officer Kevin Turner, referring to the company’s tablet computer family and gaming console.
Analysts were expecting an adjusted profit of 71 cents a share for the quarter, the second of the company’s fiscal year.
The e-commerce giant handed in non-GAAP earnings of $1.00 per share on revenue of $35.75 billion, missing Wall Street estimates of $1.58 per share on revenue of $35.98 billion. “It’s easier and can be more cost effective to run it on the cloud, and let Microsoft worry about your Exchange servers”.
The company’s net income fell to $5 billion, or 62 cents per share, in its second-quarter ended December 31 from $5.86 billion, or 71 cents per share, a year earlier.
Microsoft is betting on reinventing itself as a cloud company, and the financial results it released Thursday show that its push is paying off despite an overall decline in revenue.
The company’s phone revenue plummeted 49 percent when excluding foreign currency fluctuations as a result of the changes, which included cutting the number of smartphones it sells. Pro Windows revenue fell 6 percent; non-Pro Windows revenue fell 3 percent, outperforming the consumer market.
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The global cloud storage industry was worth nearly $19bn past year, according to Research and Markets. Xbox Live monthly active users are up 30 percent year-on-year, hitting 48 million last quarter.
