Microsoft Corp. reported earnings that fell short of analysts’ estimates due to a higher tax rate in the quarter and a weak market for personal computers. Despite revenue at Azure more than doubling, operating profits at the division shrank 14 percent while revenue grew 3 percent. Chief Financial Officer Amy Hood said results are being hurt by weakness in one-time purchases of software, what Microsoft calls its transactional business.
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Dan Morgan, senior portfolio manager at Synovus Securities, said third-quarter revenue in Microsoft’s cloud and server group came in a bit below his projections, particularly given the company’s focus on cloud for future growth.
“We’re trying to validate this story that Microsoft is truly becoming a cloud company, and they’re not going to be relying on the desktop computer”.
The company made $3.8 billion in net income on $20.5 billion in revenue, both of which are down year-over year.
– Revenue in More Personal Computing increase by 1% to $9.5 billion year on year (YoY). Adjusted per-share profit was flat at 62 cents, 2 cents below what analysts surveyed by Thomson Reuters expected.
Office 365 revenues also rose by 63 per cent in constant currency, which in turn drove seven per cent growth in the overall Office commercial products and cloud services bracket.
However, Microsoft is now shedding its mobile business which has been costly for the company and focusing on cloud and its rapid growth.
The results showed a two per cent drop in revenue from Windows, the PC operating system which has been the core for Microsoft for years, despite a larger drop in PC sales. It also saw some growth in the cloud department.
Microsoft’s latest quarterly earnings report has highlighted just how screwed Windows Phones are. Its Commercial Other segment offers enterprise services, including premier support services and Microsoft consulting services; commercial cloud comprising Office 365 Commercial, other Microsoft Office online offerings, Dynamics CRM Online, and Microsoft Azure; and other commercial products and online services.
But overall the response from Satya Nadella, Microsoft CEO, was upbeat in an analyst call and contained plenty of mentions of the channel and the plans it had for partners and developers. Adjusted revenue was $22.1 billion, in line with Wall Street forecasts. There are now 22.2 million Office 365 consumer subscribers.
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Nadella mentions that Microsoft crossed over 270 million active devices running Windows 10 this month. Gaming revenue grew 6 percent in constant currency, with 11 percent increase in game revenue partially offset by reduced revenue from hardware sales. The company has been adding customers and workloads for its Azure services, which let clients run and store applications in Microsoft’s cloud-data centres. Revenue fell to $20.531bn from $21.729bn.
