Microsoft posted mixed first quarter earnings for its fiscal year 2016, with revenues of $21.66 billion – a 7. percent year-on-year decline that still exceeded analysts’ estimates.
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For the quarter ended September 30, Microsoft reported non-GAAP earnings per share (EPS) of $0.67, which beat the Street by $0.10, and showed a 3% year-over-year (YoY) increase.
At present, Microsoft Corporation (NASDAQ:MSFT) stock is soaring; it is trading up 10.52% at $53.08, as of 11:13 AM EDT today, near the 15-year high of $55 in 2000.
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The report highlighted the company’s Intelligent Cloud segment which grew by 8% (+14% in constant currency) to $5.9 billion. Paid products brought in a good 70 percent growth in revenue for Office 365 and 5 percent growth for other Office cloud services. Sales in its smartphone business tumbled a stunning 54%, which the company said was part of its strategy to streamline its phone offerings.
Once again, Microsoft looked to emphasize its enterprise cloud services growth in an effort to put a positive spin on the news.
Total revenue declined 7% (2% in constant currency) and gross profit declined 3% (up 3%), both ahead of our internal forecast. Monthly active users for Xbox Live was also up, growing 28 percent to 39 million. One of the bright spots in that segment was stronger sales of revenue tied to search advertising, which was up 29 percent. But the Surface Book is its first full-fledged notebook PC, competing directly with its Windows hardware partners, including Lenovo, Hewlett-Packard (NYSE:HPQ) and Dell. Revenue from Azure, which is the company’s cloud computing platform, grew two-folds from the same quarter previous year.
Revenue in Productivity and Business Processes declined 3% (up 4% in constant currency) to $6.3 billion. Office 365 revenue, for example, climbed a staggering 70 percent increase, now reporting 18.2 million subscribers.
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Interestingly, the layoffs come after Microsoft said in April that the job cuts were largely over. In addition, Microsoft’s cloud-based Dynamics customer relationship management (CRM) and enterprise resource planning software suite grew by 12 percent. Windows OEM sales dropped 6 percent, or “what you expect when you give Windows away for free”, Gillett said, referencing the free Windows 10 upgrade promotion. Windows itself saw a revenue dip of 6 percent, which Microsoft noted in its release was still a better performance than the rest of the PC market.
