Revenue declined by 6% year-over-year for the quarter to $21.78 billion. Operating and net income for the period came in at $5.3 billion and $3.8 billion, respectively. Without the currency impact, revenue for the company was $22.1 billion (up 5%), earnings $0.62 (up 3%), operating income $6.8 billion (up 10%), and net income $5 billion (up 6%), but failed to do so.
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Two categories showed lower operating profits, led by what Microsoft calls its intelligent cloud division, which includes its Azure cloud-services business as well as traditional server software. Office commercial and cloud services revenue grew by 7%, primarily driven by sales of Office 365, and the company now has 22.2 million customers using the subscription version of Office.
While its cloud revenue grew three percent to US$6.1-billion, its personal computing segments saw more modest growth of 1%.
In a transcript of the earnings call posted on the Seeking Alpha financial website, the company’s chief financial officer, Amy Hood, said margins in the company’s commercial cloud had been affected by investments in datacentre capacity and expanding cloud services to different geographies. At one point in 2013, it was reported to be booking $2 billion a year in revenue from Android licensees.
However, the core offering of Microsoft in personal computing section continued to slow down with an overall decline in PC market globally.
Cloud business of Microsoft continue to show positive signs with Azure revenue growing by 120 percent, and usage of Azure compute and Azure SQL database more than doubling year over year. Dynamics, including licenses and cloud services revenue, went up 9% in constant currency and CRM Online seat adds more than doubled. Xbox Live users are up year-on-year to 46 million, but sequentially this is actually a decline; last quarter, Microsoft had 48 million monthly active Xbox Live users. Office 365, in particular, is rocketing, with revenues up 63pc.
Windows Phone was the main culprit for the company’s weaker than expected quarter.
“While investors wanted more, Microsoft had an impressive quarter and repeated what they did in prior quarters related to the combination of cloud, Azure and Windows”, said Patrick Moorhead, an analyst with Moor Insights & Strategy, in an e-mail.
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Install Office 365 in OS X El Capitan. Surface revenue, however, proved to be a bright spot, increasing 56 percent on the back of the Surface Pro 4 and Surface Book release in the second fiscal quarter.
