Phone revenue shrunk 49% in constant currency. It now breaks down earnings into three distinct business units focused on productivity services, cloud, and Windows/devices.
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‘Our commercial business executed well as our sales teams and partners helped customers realize the value of Microsoft’s cloud technologies’.
Nevertheless, the company’s intelligent cloud group, which includes its Azure service, rose five percent to $6.3 billion.
Overall, Microsoft raked in a tidy $6.3 billion in profit and $20.4 billion in revenue during the quarter – but it’s showing no signs of cracking smartphones. Net income in the period declined to $5 billion.
Microsoft, under Chief Executive Satya Nadella, has been focusing on cloud services and mobile applications as growth slows in its traditional software business.
Wall Street was looking for second quarter non-GAAP earnings of 71 cents a share on revenue of $25.26 billion.
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. Microsoft shares were up more than 5 percent in after-hours trading. Last quarter, that figure hit $9.4 billion, up from $8.2 billion the previous quarter. The company is slowly but surely converting its traditionally most lucrative software business into a subscription revenue stream. This part of the company makes Azure plus other businesses like Office 365 and it is up 15 percent from the $8.2 billion revenue it estimated last quarter.
This I suspect is better than expected, with Windows Phone exceeding 10 million devices sold a year ago, suggesting sales will once again be in the 5-6 million range.
Azure revenue soared 140% in constant currency terms, with revenue from Azure premium services almost trebling year on year.
Intelligent cloud revenue rose 5% (up 11% in constant currency) and Windows OEM revenue declined 5% in constant currency. On the flip side, the launch of the Surface Pro 4 and Surface Book saw Surface revenue grow by 29 percent in constant currency.
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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.
