All this is in line with CEO Satya Nadella’s overall strategy of shifting the company more heavily into cloud, and this was reflected by the response of the stock market.
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Here’s an interesting stat: Microsoft’s Bing and its Surface lineup contributed more than $2.3 billion of revenue for the company during its second quarter. “Growth in the cloud, especially in premium services, plays to Microsoft’s growing strengths and helps drive other parts of the portfolio-like Enterprise Mobility”. Office 365 now has 20.6 million subscribers, which was a major contributor to the success of the sales of Productivity and Business Processes (PBP), which rose to $6.7 billion in value, from $6.3 billion in the last quarter.
However, revenue from smartphones was down 49pc, raising fresh questions about Microsoft’s plans for the future of its Lumia devices, which it inherited when it acquired Nokia’s handset business for $7.2bn; an acquisition it acknowledged was a failure.
“We expect our commercial business to remain healthy, with an ongoing shift to annuity as new and existing customers adopt and use our commercial cloud services”, said Microsoft chief financial officer Amy Hood. The company’s cloud based service revenue grew 10 percent and its Azure revenue increased 140 percent.
As for the company’s much-talked-about hardware, the Surface tablet was back on the rise after dipping in the last quarter, with revenue up 29% this time around.
Office commercial products and cloud services revenue rose 5 percent driven by Office 365 revenue growth of almost 70 percent.
The headline figure here is the phone revenue, which saw a decline of 49 percent in constant currency. That segment, which also includes its Xbox videogame consoles and popular Surface Pro, posted a 2% decline in revenue excluding currency impacts.
Last July, Microsoft introduced Windows 10, raising some hope in the industry of a rebound in PC sales.
Now the second largest cloud provider, Microsoft stands far ahead of rivals Salesforce, Oracle and Google, according to analysts at Goldman Sachs.
‘Businesses are also piloting Windows 10, which will drive deployments beyond 200 million active devices’.
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“The big focus of the Street is converting these downloads into revenues on both the consumer and enterprise front over the coming 12 to 18 months”, the analyst said in an email.
