Microsoft profits fall but cloud success sends share price up

The better than expected results were driven mainly by Microsoft’s cloud services division, which reported a 5% year-on-year revenue hike to $6.3bn, accounting for more than a quarter of the company’s total revenue. This part of the company makes Azure plus other businesses like Office 365 and it is up 15 percent from the $8.2 billion revenue it estimated last quarter.

Here’s an interesting stat: Microsoft’s Bing and its Surface lineup contributed more than $2.3 billion of revenue for the company during its second quarter.

During the earnings call Microsoft CEO Satya Nadella told analysts that the clearest indicator of the company’s progress is that almost 30% of the search revenue in December came from Windows 10 devices, partly as a result of user engagement with Cortana. Microsoft said phone revenue declined 49% in the second quarter, excluding currency effects, an especially poor showing after repeated efforts to establish a foothold in the phone market.

As for the company’s much-talked-about hardware, the Surface tablet was back on the rise after dipping in the last quarter, with revenue up 29% this time around.

Intelligent Cloud (IC), which includes service revenue and Enterprise Services: $6.4 billion compared to $5.9 billion in the last quarter.

Likewise, Microsoft did not fully reveal Office 365 cloud service sales.

Microsoft reported quarterly revenue and profit that beat analysts’ expectations, driven by aggressive cost cutting and growing demand for its cloud products and services.

Fortunately for the computing giant, its Surface, Windows 10 and cloud computing business remain strong. Within this unit, the server products and cloud services revenue grew 10 percent and “Azure Cloud” revenue grew 140 percent.

Analysts polled by Thomson Reuters had expected adjusted per-share profit of 71 cents and revenue of $25.26 billion. “Businesses are also piloting Windows 10, which will drive deployments beyond 200 million active devices”, added Nadella. The company pulled in revenue of $25.7 billion in constant currency, and $0.78 earnings per share.

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

Redmond, Wash.-based Microsoft’s stock had climbed more than 26 per cent in the past 12 months to $52.06 at Thursday’s close, even as the broader market has dropped 5 per cent. The shares rose 3 per cent in after-hours trading.