Surface tablet computers were a bright spot for Microsoft, with revenue increasing 29 percent on the backs of the launch of Surface Pro 4 and Surface Book, according to the earnings report.
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Shares rose 5.5 per cent to $US54.91 a share in after-hours trading. Microsoft is also banking on enterprises to help improve Windows 10 adoption rates.
The number of people using the Xbox Live service for digital content and video games climbed 30% to a record 48 million. Microsoft stressed that the performance of this business unit was one of the integral factors in the company’s strong performance for the last quarter, as revenue from server products grew 10 percent while revenue from Azure grew a whopping 140 percent.
Revenue from Office 365, which increased almost 70% year over year, accounted for the constant-currency revenue growth in this division.
Sales in the “More Personal Computing” group were down 5%, and would have been down 2% in constant-currency terms.
In addition, Microsoft’s financial results for the reporting quarter have further revealed that the company’s revenue from smartphone sales plunged 53 percent, or $1.2 billion, during the quarter.
For its second fiscal quarter, which ended on December 31, the company reported net income of almost $5 billion, or 62 cents a share, compared with $5.86 billion, or 71 cents a share, during the same period a year earlier. In other words, both Windows and the PC market went down during the quarter, but the operating system declined less.
Chief Executive Satya Nadella has focussed on cloud services and mobile applications on slower growth in its traditional software business.
The phone revenue declined 49 percent during the quarter because of what Microsoft calls “our strategy change announced in July 2015”. Office 365 now has 20.6 million subscribers.
Microsoft plans to hold an earnings call at 5:30PM EST.
“It was a strong holiday season for Microsoft, highlighted by Surface and Xbox”, Chief Operating Officer Kevin Turner said in a statement.
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Microsoft reported a better-than-expected second quarter the company grew its cloud footprint and delivered solid gains in Office 365 subscriptions and Dynamics CRM Online seats.
