Over the past few quarters, Microsoft and other tech companies have reported significant impact from the high value of the U.S. dollar, and have offered equivalent financial figures that show what their numbers would have been had the value of foreign earnings not been eroded by this conversion. Microsoft said that growth is helping to drive an increase in search advertising revenue, which rose 55 percent to more than $1.5 billion.
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Investors didn’t like the miss, pushing the shares down 4.8% to $53.10 in after-hours trading on Thursday.
Excluding one-time items, adjusted earnings for the quarter were $0.62 per share.
Meanwhile, revenue in the company’s Surface business climbed 56 percent from the same quarter a year ago, to more than $1.1 billion.
“We would have liked to have seen seven to nine per cent growth”, Dan Morgan, a portfolio manager at Synovus Trust who holds Microsoft shares, said of intelligent cloud revenue.
Wall Street was expecting the company to show positive results from a series of changes that CEO Satya Nadella has been making in Microsoft’s business. Commercial office and cloud services sales were up 7 percent and Dynamics software and cloud revenue was up 9 percent. Despite revenue at Azure more than doubling, operating profits at the division shrank 14 percent while revenue grew 3 percent.
Windows revenue from computer makers declined 2% in constant currency, even as the uptake of Microsoft’s nine-month-old Windows 10 has been rapid. Surface revenue looked better; it was about $1.1 billion, up 56 percent year-on-year, driven by Surface Pro 4 and Surface Book. In particular, Microsoft saw only a 3 per cent increase in revenue from its “Intelligent Cloud” business, where the company has invested heavily to help business customers run their operations on Microsoft’s servers.
In the productivity and business processes division, revenues were up a single percentage point on the quarter at $6.5bn.
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There was good news on the Xbox front too, with Xbox Live active users rising by 26% compared to past year, with 46 million players now using the service.
