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. Windows revenue normally is tied to the success of PCs which fell 10.6 percent globally in the December quarter from a year earlier, according to research firm IDC.
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Office commercial products and cloud services revenue rose 5 percent driven by Office 365 revenue growth of almost 70 percent.
This division covers Microsoft’s Office productivity tools, including Office 365 and the Dynamics business software lines, where Office consumer revenue declined by 14 percent, or eight percent in constant currency. With total revenues of $25.7 billion, income from cloud computing now represents over a third of its fortune.
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”. It is now on track for $9.4 billion in annual revenue $9.4 billion, up from $8.2 billion it estimated in the previous quarter.
“Businesses are also piloting Windows 10, which will drive deployments beyond 200 million active devices”, the Indian-born top executive added.
Windows phones have not been selling well and Microsoft is now seeing a decline in both its smartphone business – which had sales of 4.5 million – and its “dumb” phone business.
The company reported a stronger-than-expected adjusted profit, helped by continuing strong sales in its cloud operations.
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.
NPD Group analyst Stephen Baker said: “People who think Microsoft is sliding into irrelevancy really need to re-evaluate how they see the company”. And finally Xbox Live active users grew to 48 million, that’s 30 per cent up year-on-year.
“We expect our commercial business to remain healthy, with an ongoing shift to annuity as new and existing customers adopt and use our commercial cloud services”, said Microsoft chief financial officer Amy Hood.
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Microsoft made $1.35 billion in revenue from Microsoft Surface tablets alone in the last quarter, largely due to the new Surface Pro 4 and the Surface Book laptops, the company reported.
