Yet Windows fared better than the overall PC business.
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The cloud division, which includes Azure, grew revenue by 5% to $6.3 billion (£4.3 billion) and the company managed to see a smaller decline in its revenue from Windows sales than Wall Street expected.
Office 365 had a decent quarter, adding 2.4 million subscribers to hit 20.6 million.
Amazon and its fast-growing Amazon Web Services business is a formidable opponent in cloud computing, though.
“We delivered double-digit operating income growth in non-GAAP constant currency while investing in key strategic areas that position Microsoft for continued long-term growth”, said Amy Hood, executive vice president and chief financial officer of Microsoft, in a statement.
In addition, there was a big increase in the number of devices using Windows 10, up from 110 million in the previous quarter to 200 million. The fact that companies are moving much of their data onto the cloud proved a bright lucrative. Microsoft has said in the past that it expects this phone to do well overseas where people don’t have both a computer and smartphone.
However, revenue from smartphones was down 49pc, raising fresh questions about Microsoft’s plans for the future of its Lumia devices, which it inherited when it acquired Nokia’s handset business for $7.2bn; an acquisition it acknowledged was a failure. For the quarter, Microsoft reported $25.7 billion in revenue. The two companies are proving to be fierce rivals in the arena of public cloud, where Microsoft is gaining momentum with its Azure product line, which saw a 140% year-over-year jump in revenue in constant currency. However, Xbox hardware revenue declined because of lower Xbox 360 sales, though the company did not provide specific numbers. Sales tanked by 49 per cent compared to the same quarter a year earlier, with Microsoft selling only 4.5 million Lumia phones – mostly at the low end – and the company’s market share falling to just over one per cent by our guestimates. Revenues here fell 2% to $12.7bn (at constant currencies), which the company said was ahead of the broader PC market, reflecting a higher proportion of premium devices, a strong 29% underlying growth in revenues from Surface devices and a 30% increase in Xbox Live active users.
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Office 365 revenue grew almost 70 percent, a sign of Microsoft’s success at diversifying away from Windows.
