Overall, the company’s revenue continued to shrink slightly, with total revenue in the first quarter reaching $20.5 billion compared with $21.7 billion a year earlier. Excluding this impact, and assuming constant currency values, the company says that its revenue was $22.1 billion (up 5 percent), operating income was $6.8 billion (up 10 percent), and net income was $5.0 billion (up 6 percent).
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The vendor now has around 85,000 transacting partners selling the cloud based Office suite to small customers and as a result its revenue from that product line increased.
Productivity and Business Processes, which includes Office software, and More Personal Computing both grew sales one percent, to $6.5bn and $9.5bn respectively.
Kevin Turner, chief operating officer at Microsoft said: “Digital transformation is the number one priority on our customers’ agenda”.
Microsoft’s personal computing revenue grew just 3 percent, up to $9.5 billion (£6.6bn), with Windows computer revenue falling 2 percent.
Azure revenue grew 120 percent with usage of Azure compute and Azure SQL database more than doubling.
Windows 10 is the fastest-growing version of Microsoft’s operating system, and as of Thursday, it had been installed on 270 million devices, representing 35% growth from the previous quarter. Sales of Microsoft Office products and cloud services for business grew by 7% in constant currency driven by Office 365 revenue growth of 63% year-over-year. Windows OEM revenue fell by 2%, but considering the double-digit declines in PC sales, this is a bit of a triumph.
Microsoft put the blame on a strong dollar and higher-than-expected taxes, which the company said drove the decline in earnings by 4 percent. However, the company missed those marks by significant margins, posting instead only 47 cents per share in earnings and revenue of $20.5 billion.
But fear not, while Windows Phones are seemingly in a freefall into oblivion, the earnings report showed that many other parts of Microsoft’s business have remained profitable, and impressively so. According to said expectations, the company should’ve touted adjusted earnings of 64 cents per share and $22.09 billion in revenue. Sales in the segment contracted relative to a year ago, but Microsoft remains upbeat that its future is bright in the cloud. Surface Pro 4 and the Surface Book helped drive a 61 percent increase in Microsoft’s Surface revenue.
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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.
