In a filing covering the March quarter, Microsoft pointed to the revenue deferral of Windows 10 – a relatively new way of accounting for the Redmond, Wash. company – as a reason for the 6% year-over-year decline in revenue.
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Microsoft shares fell 3.8 percent, to $53.70 in after-hour trading.
The company’s net income in the third quarter ended March 31 fell to $3.76 billion, or 47 cents per share, from $4.99 billion, or 61 cents per share, a year earlier.
“Organisations using digital technology to transform and drive new growth increasingly choose Microsoft as a partner”, Mr Nadella said of the results. Microsoft is also banking that hundreds of thousands of existing Windows and Office users will turn to Azure as their preferred cloud. Microsoft’s Windows smartphones continue their freefall with a 46 percent year-over-year decline in sales on a constant-currency basis. Microsoft’s hardware ventures have been rather ambitious, and the Windows 10 Mobile and the Windows Phone devices have not managed to make much of an impact in the markets despite their best efforts.
Investors are unhappy not only because Microsoft missed on earnings for the first time in 10 quarters, but also because the company lowered guidance for the current quarter.
During yesterday’s earnings call, CEO Satya Nadella (pictured above) said that Microsoft had a “solid quarter” in the most recent reporting period, with the commercial cloud business halfway to its fiscal year 2018 revenue goal of $20 billion.
Adjusted revenue of $22.08 billion was lower than the $22.09 billion analysts had expected, according to Thomson Reuters I/B/E/S.
That said, Gillis adds that in the larger scheme of things, tech monoliths such as Microsoft and Google aren’t mortally wounded by the sort of stock drops seen Friday.
Going ahead, Microsoft is looking for revenue in the band of $6.5 to $6.7 billion in its Productivity and business process division.
Revenue from productivity software such as Office grew 1% to $6.52 billion.
Last week, Gartner blamed falling sales of commercial PCs in EMEA on the fact that business buyers are evaluating Windows 10 and delaying major deployments until the end of 2016. Just 2.3 million Lumia phones were sold, down from more than 8 million a year ago, as the collapse due to delayed product releases, lay-offs, loss of confidence, and a near total abandonment by mobile phone carriers, continues unabated. “The intelligent cloud” chiefly comprises Microsoft’s products and services under the Cloud & Enterprise domain, including Windows Server, SQL Server, System Center, Azure, and Enterprise Services. Phone revenue dived 46 percent.
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Search advertising revenue excluding traffic acquisition costs grew 18 percent with continued benefit from Windows 10 usage.
