Rising Surface Sales Helped Microsoft Post $6.3 Billion Quarterly Profit

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.

Analysts on average had expected revenue of $25.26 billion.

CEO Satya Nadella said business testing of Windows 10 should help the operating system to be running soon on 200 million devices.

Microsoft was particularly pleased with its cloud performance, noting a 10 percent rise in revenue related to server products and cloud services, and a big 140 percent jump in Azure revenue. Office 365 now has 20.6 million subscribers, which was a major contributor to the success of the sales of Productivity and Business Processes (PBP), which rose to $6.7 billion in value, from $6.3 billion in the last quarter. The phone revenue declined 49 percent during the quarter because of what Microsoft calls “our strategy change announced in July 2015″. On the negative side, Microsoft is suffering due to floundering personal computer business, which is hurting profits from longtime Microsoft software businesses, especially Windows, while on the positive side, the flourishing cloud business gives hopes to the investors that the company will retain its relevance at least for some years to come. Companies moving much of their information technology off premises, part of the cloud-computing trend, proved a bright spot. The company chose to lay off thousands of people from its phone division previous year and refocus on building a relatively small number of Windows Phone handsets rather than keep making the broad range of phones that Nokia had prior to its acquisition in 2014.

Perhaps a better indicator of its cloud strength is what the company calls its combined cloud business, on track for $9.4 billion in annual revenue, the company said.

In other segments, OEM Windows license sales were down 5 percent, outperforming the PC market’s overall decline but still not too encouraging. On the flip side, the launch of the Surface Pro 4 and Surface Book saw Surface revenue grow by 29 percent in constant currency.

Additionally, the company’s offerings with its XBox Live gaming service has now reached 48 million users, a 30% increase when compared to the same time a year ago. Revenue, which fell 10% to $23.8 billion, on an adjusted base rose 3% excluding currency effects.

Looking at Microsoft’s “More Personal Computing” segment which envelopes all its consumer hardware, a five per cent revenue decline was experienced in FY16 Q2.