Microsoft’s products had mixed performance, and while some improved during the quarter, others fell significantly, dragging down the company’s revenues. Revenue from server products and cloud services is up five percent in constant currency, while the number of Enterprise Mobility customers more than doubled to 27,000 and the installed base almost quadrupled year over year.
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Microsoft said its Intelligent Cloud segment, which includes its lineup of Azure public cloud services, posted a revenue increase of 3% to $6.1 billion.
Search revenue rose 55% to $1.5 billion, thanks to ads.
With the PC market in what appears to be continual decline, and Windows Phone sales adding up to a vanishingly small percentage of the overall market, Satya Nadella’s decision to push hard into the cloud and to effectively decouple Office from Windows looks ever more effective.
In what analysts said was a bright spot, its More Personal Computing division – Microsoft’s largest – saw sales gain 1% to $9.49 billion and operating profit increase 57% to $1.65 billion.
Operating profit at the productivity and business processes group, which includes its Office software, dropped 7 per cent. Revenue grew 1 per cent to $6.5 billion.
Microsoft just reported earnings for the quarter ended March 31, and while it was more or less in line with expectations, the stock is off more than 4% after hours.
Server products and cloud services revenue increased by 5% in constant currency, driven by double-digit annuity revenue growth, while Azure revenue grew by 120% in constant currency. Cloud revenue is expected to be in the range of $6.5 to $6.7 billion.
“We believe enterprise deployments will continue to drive up the over 270 million monthly active devices running Windows 10”.
In Q3 2016, Microsoft only sold 2.3-million Windows Phone devices, a drastic drop from the 8.6-million units it sold in Q3 2015. Microsoft has often moved revenue gained from sales during the current quarter into future quarters to cover unanticipated costs such as support.
Windows OEM was also down by 2% though the company said that it still outperformed the PC market. That meant Lumia handset revenue fell 46 percent.
What will be interesting to see from Microsoft is whether the company’s cloud growth will ever bring it back to its previous financial highs.
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Not surprisingly, revenue from Windows revenue declined.
