Microsoft’s personal computing revenue grew just 3 percent, up to $9.5 billion (£6.6bn), with Windows computer revenue falling 2 percent.
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Microsoft CEO Satya Nadella told analysts during a post-earnings announcement conference call that the company is very focused on Office 365.
In particular, Microsoft saw only a 3 percent increase in revenue from its “Intelligent Cloud” business, where the company has invested heavily to help business customers run their operations on Microsoft’s servers.
Microsoft now has three reporting segments: Productivity and Business Processes (covering Office, Exchange, SharePoint, Skype, and Dynamics), Intelligent Cloud (including Azure, Windows Server, SQL Server, Visual Studio, and Enterprise Services) and More Personal Computing (covering Windows, hardware, and Xbox, as well as search and advertising).
Microsoft says Windows 10 is now running on more than 270 million machines, a healthy figure for software that was released only nine months ago. The segment grew by $1.1 billion during the quarter, up 61 per cent year-over-year.
Revenue in that group increased 8 per cent, excluding the effect of foreign currency, to US$6.1 billion.
Revenue in its cloud business, which includes Azure, rose 3.3% to $6.1bn, but operating profits at the division shrank 14%. New capabilities included more features for Skype for Business, analytics, and security.The company blamed a higher than expected tax rate for part of the lower net income.
Microsoft lowered revenue guidance for Q4 to $21.4 billion from $22.4 billion, pushing it below the analyst forecast of $23.1 billion.
Nadella claimed Windows 10’s productivity, security and device management capabilities are a hit with business users, adding that 83 per cent of enterprise customers are in active pilots today. Search advertising revenue grew by 18% owing to tighter Bing integration with new Windows 10 devices. Rather than pushing its own mobile platform, Microsoft appears to be focusing more on creating cross-platform experiences and software and services that extend from Android and iOS. Office consumer products and cloud services grew by 6% in constant currency, with Office 365 consumer subscribers increasing to 22.2 million in number.
The company did reveal some growth on the Xbox side of things, recording a 26% year-on-year rise in Xbox Live users, to 46 million.
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As well as having the channel to thank for pushing Office 365 there was also some concerns that more could be done with its Lumia products, where weak sell-through left high levels of inventory being held by partners.
