Microsoft shares jump after strong second quarter results

This segment, which includes results from server products and services (including Windows Server and Azure), grew 5 percent to $6.3 billion.

Investors reacted positively to the news, with shares of Microsoft trading up almost 5 percent today. The company has had more success in that business than other established commercial tech giants like Hewlett-Packard and Oracle, according to Ives, who called cloud computing a “bedrock” element of Nadella’s strategy.

Microsoft posted its second-quarter 2016 earnings report Thursday, and shareholders had reason to be pleased.

Microsoft’s net income fell to $5bn, or 62c per share in its second-quarter ended December 31, from $5.86bn, or 71c per share, a year earlier.

Revenue of $25.7 billion (Non-GAAP), is down 2% year-on-year, but ahead of the $25.26 billion expected by Wall Street.

Currently, there are 200 million active users of Windows 10, but the company is aiming to have 1 billion users by 2019.

However, revenue in productivity and business processes declined 2 percent to $6.7 billion and revenue in personal computing declined 5 percent to $12.7 billion. Microsoft cited higher Office 365 and dynamics revenues.

Office 365 revenue growth was almost 70 percent in constant currency.

Revenues at Microsoft fell by one-tenth in the last quarter of 2015, while profits fell by 15 per cent, both largely as a result of falling PC sales.

Total revenue, however, fell 10.1% to $23.8bn, squeezed by a strong dollar as well as a weak personal computer market that has reduced demand for Microsoft’s Windows operating system.

“It was a strong holiday season for Microsoft highlighted by Surface and Xbox”, explains Kevin Turner, chief operating officer at Microsoft.

Microsoft Azure cloud business – which competes head-on with the Amazon Web Services juggernaut – grew 140% from the same quarter in 2014, in constant currency.

Office 365 now has 20.6 million consumer subscribers. However, Xbox hardware revenue declined because of lower Xbox 360 sales, though the company did not provide specific numbers.

In terms of devices, Surface sales increased strongly, with revenues up by 29 per cent following the launch of the Surface Pro 4 and Surface Book.