“The enterprise cloud opportunity is massive, larger than any market we have ever participated in”, Microsoft Chief Executive Satya Nadella told analysts. 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. Further, it bodes well for commercial cloud profitability, evidenced by a 900-basis-point uptick in the segment’s gross margin to 46%.
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Microsoft also benefited from the shift away from PCs to mobile computing devices, with Surface revenue up 29% in constant currency terms, driven by the launch of Surface Pro 4 and Surface Book.
Microsoft is still making a lot of money, but the company is doing it with Surface, Windows 10 and its cloud platform, and definitely not Windows phones.
All thanks to Microsoft which sold only 4.5 million Lumia mobile devices in the recent quarter, as compared to 10.5 million units sold in the same period a year ago, according to The Verge.
Microsoft has reported a five percent growth in its “Intelligent Cloud” division, which includes sales of its Azure public cloud services.
Phone revenue declined 49 percent.
The company reported a rise in unearned revenue balances of $19.8bn, up 8% in constant currencies, representing services that have been paid for up front, but not yet delivered. Its Azure business has more than doubled in revenue each year – a much faster growth than AWS’ 65%.
Nadella also shared that Windows 10 was now powering more than 200 million devices, a number that Microsoft hopes will hit $1 billion in the next few years.
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‘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. The software giant had 20.6 million Office 365 consumer subscribers as of the end of the quarter and recorded an 11% constant currency increase in Dynamics revenue. Sales for server products and cloud services revenue grew 10% in constant currency, while Azure revenue grew 140% in constant currency with revenue from Azure premium services growing almost 3x year-over-year.
