Executives touted the growth and strength of the company’s cloud business and noted that weaker PC sales and a strong decline in Microsoft’s phone business hurt overall results. Excluding this impact, and assuming constant currency values, the company says that its revenue was $22.1 billion (up 5 percent), operating income was $6.8 billion (up 10 percent), and net income was $5.0 billion (up 6 percent).
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Revenue fell to $20.5 billion from $21.7 billion the year before. However, on an adjusted basis, revenue rose 1.6% to hit $22.08 billion in the latest quarter. Net income was $5 billion, or 62 cents per share, falling short of analyst expectations of 64 cents a share.
Microsoft continues its trend of reporting its financial results under three categories- Productivity and Business Processes (PBP), which includes Office and Office 365 (commercial and consumer); Intelligent Cloud(IC) division that includes Azure cloud, services, and non-cloud related servers; and the biggest division, i.e., More Personal Computing (MPC), which contains Windows, Devices, Gaming and Search.
“Dynamics is expanding to include new scenarios such as Internet of things, field service, customer self-service and business intelligence”, said CEO Satya Nadella (above) on the company’s earnings call.
Microsoft said its revenue from Windows software licenses declined 2% in the March quarter, after adjusting for currency fluctuations. Last week, Gartner said PC sales fell almost 10% in the first quarter of 2016.
Microsoft Chief Financial Officer Amy Hood attributed the miss to a “catch up” tax adjustment to account for an expected increase in the full-year tax rate.
“We would have liked to have seen 7% to 9% growth”, said Dan Morgan, a portfolio manager at Synovus Trust, which holds Microsoft shares, said of cloud revenue.
MSFT closed Thursday’s trading at $55.78, up $0.19 or 0.34%, on the Nasdaq. Xbox Live monthly active users rose to 46 million at a growth rate of 26 percent.
Microsoft had impressed investors in recent quarters with gains in selling Office software and developer tools via the Web, inroads in cloud-computing businesses pioneered by such Internet natives as Google, Amazon.com and Salesforce.com. Improved profit margins were driven by lower expenses in Microsoft’s phone business, which the company scaled back drastically past year, and sales of Surface portable devices.
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Run rate are fictionalizedprojected earnings that firms like Microsoft are throwing out “run rates” to convince Wall St their cloud business is real and long term.
