Microsoft’s personal computing revenue grew just 3 percent, up to $9.5 billion (£6.6bn), with Windows computer revenue falling 2 percent. Operating income was $5.3 billion, a 20 percent drop, net income was $3.8 billion, down 25 percent, and earnings per share were $0.47, a 23 percent decline. For the three months ending March 31, the company reported a net income of $3.7-billion on revenue of $20.53-billion, leading it to miss analyst expectations.
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In the earnings call, Microsoft CEO Satya Nadella said the company was working to make Office 365 a world-class productivity and communications service.
Revenues in Microsoft’s Intelligent Cloud Group, which includes Server products, Azure and Enterprise Mobility, grew 8pc to $6.1bn.
Overall, the company’s Intelligent Cloud business grew 3% (or 8% in constant currency) to $6.1 billion. Revenue for the phone division fell by “just” 46%, indicating that what Microsoft sold was, at least, higher-value (and thus most likely higher-margin) devices.
“Organizations using digital technology to transform and drive new growth increasingly choose Microsoft as a partner”.
Microsoft lowered revenue guidance for Q4 to $21.4 billion from $22.4 billion, pushing it below the analyst forecast of $23.1 billion. Microsoft’s commercial cloud business reached $10 billion in annual revenue during the quarter.
Surface, Windows OEM and phone sales are all part of the More Personal Computing unit.
The company is also “expanding into new markets, such as security, analytics, and cloud voice, where we see an opportunity and where we can differentiate”, Nadella said. While Windows Phone isn’t faring well against Apple’s iPhone and a galaxy of Android devices, Microsoft has other avenues to explore in its quest for success in the mobile space.
The results showed a two per cent drop in revenue from Windows, the PC operating system which has been the core for Microsoft for years, despite a larger drop in PC sales.
Gartner and the International Data Corporation both recorded steep declines in the global PC market in the 2016 first quarter.
Despite an emphasis being placed on the “other bets” side of the business, which includes the company’s cloud division, there is little sign of it making big in-roads into.
Office 365 continues to shine as well and now has over 22 million subscribers, up ~80% YoY from 12.4 million during the same quarter in 2015.
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“In response to enterprise customer demand, and to increase our share in the cloud market, we grew operating expenses by 13% through Azure-focused investments across engineering, additional sales and marketing capacity and the acquisition of Xamarin”, Hood said.
