Microsoft hails software as driving force behind strong financial results

This was led by a decline in Windows OEM sales, down by five per cent in constant currency as PC sales continued to decline in the quarter, despite the introduction of Windows 10 at the end of July. In just the last quarter, the Surface business booked $1.35 billion in sales, mostly thanks to the new Surface Pro 4 tablet and Surface Book laptop. They closed regular trading at $52.06 a share, up 26 percent from a year earlier. Companies moving much of their information technology off premises, part of the cloud-computing trend, proved a bright spot. In short, Microsoft has found some firm footing in the competitive cloud computing market. Sales for server products and cloud services revenue grew 10% in constant currency, while Azure revenue grew 140% in constant currency with revenue from Azure premium services growing almost 3x year-over-year.

Microsoft has to get “HoloLens creative” to lure customers away from Android and iOS.

Google is still the king of search, but Microsoft has leveraged its other assets – particularly Windows 10 – to drive adoption of the search engine.

“Our expectation for the PC market is roughly in line with most analysts”, Hood said.

Microsoft generates more than half of its revenue from outside the US.

However, investors were pleased with the results even though revenues and profits fell.

Microsoft’s profit on that basis rose 8%.

Like a friendly but persistent sales rep, Microsoft has a message for anyone who owns a personal computer: If you haven’t yet upgraded to Windows 10, the company highly recommends it.

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

Perhaps a better indicator of its cloud strength is what the company calls its combined cloud business, on track for $9.4bn in annual revenue, the company said. Since his appointment at the head of Microsoft in 2014, Microsoft has adopted a new focus on cloud services, such as Microsoft Azure, Dynamics CRM and Office 365.

Intelligent Cloud, which includes Enterprise Services and service revenue, made $6.4 billion compared to $5.9 billion in the previous quarter.

For the quarter, Redmond reported non-GAAP revenue of $25.7 billion for its second quarter, with adjusted earnings per share $0.78.

The company reported a rise in unearned revenue balances of $19.8bn, up 8% in constant currencies, representing services that have been paid for up front, but not yet delivered.