Microsoft said Thursday in its fiscal first quarter earnings call that Bing had achieved profitability.
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Once again, Microsoft looked to emphasize its enterprise cloud services growth in an effort to put a positive spin on the news.
The company’s net income rose to $4.62 billion in the quarter, from $4.54 billion a year ago. But it was gains in the cloud segment that led Microsoft to post earnings-per-share (EPS) of $0.67 versus Street consensus of $0.59.
Sales when excluding the effect of the rising US dollar would have been down only 2%, Microsoft said. Office 365 consumer subs grew by ~3M Q/Q to 18.2M; Dynamics revenue grew 12%. The company debuted two new products in its Surface line of laptop-tablet hybrids and two new Lumia devices, but none of these products has started shipping yet.
The “Intelligent Cloud” division saw an 8% rise in revenue, to $5.9 billion, and would have been up 14% in constnat-currency terms.
The Office range performed well despite this fall, with currency-adjusted revenue growth of 70 per cent for the software itself and five per cent for associated commercial products and cloud services.
The Productivity & Business Processes segment includes Office and Office 365 for commercial customers and consumers, plus Dynamics and Dynamics CRM Online.
More personal computing was Microsoft’s largest segment, generating $9.4 billion in sales.
But Personal Computing declined, whichever accounting practices were applied; this revenue stream was down 13 per cent in constant currency and down 17 per cent using GAAP.
Windows OEM revenue fell by 6%, though Microsoft pointed out that was less than the decline in the PC market.
Total gaming revenue rose 6% on a constant-currency basis, but Xbox hardware revenue fell as Microsoft’s older console, the Xbox 360, slowly fades into obsolescence. Xbox Live’s monthly users increased 28% YoY to 39 million.DISCLOSURES: Stifel Nicolaus and FBR Capital Markets act as market makers for Microsoft. This is also the first quarter for Microsoft where Bing, launched in May 2009, has become a profitable business.
The latest initiative taken by Nadella on cloud-based software and the release of Windows 10 in July proved to be big successes for the company.
Amy Hood, executive vice president and chief financial officer of Microsoft, says the company is actually “pleased” with the operating results this quarter, while Kevin Turner, chief operating officer, claims the business strategy is already paying off because more enterprises go for their own cloud, mobile device management technologies, and data analytics solutions.
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This is also the first quarter that Windows 10 has been available.
