Microsoft Sees Windows 10 Increase Demand For Bing

Whatever the reasons, Microsoft sold just 4.5 million Lumia phones over the last quarter, compared to 10.5 million shipped one year ago. This helped offset a 49 percent in Phone revenue, a decline that Microsoft said reflected its “strategy change announced in July 2015″.

Profit excluding certain items in the fiscal second quarter, which ended December 31, was 78 cents a share, and sales adjusted for deferrals were $25.7 billion, Microsoft said in a statement after the US stock markets closed.

Nadella says he expects that growth in commercial cloud will come from spaces where Microsoft hasn’t played so much before, such as Linux workloads, Infrastructure-as-a-Service (IaaS), Platform-as-a-Service (PaaS) and mobile cloud.

Microsoft’s aggressive campaign to promote the latest version of its flagship software has already led to the deployment of Windows 10 on more than 200 million devices since its release last summer.

Sales of productivity and business “processes” products were down 2%, but would have been up 5% if not for the dollar, at $6.7 billion.

This quarter, Microsoft’s Intelligent Cloud segment saw revenue jump 5 percent year over year to $6.3 billion. Last quarter, the company reported $9.4 billion in revenue for this group.

“We delivered double-digit operating income growth in non-GAAP constant currency while investing in key strategic areas that position Microsoft for continued long term growth”, said Amy Hood, executive vice president and chief financial officer of Microsoft. “More than 70% of the Fortune 500 [companies] now have at least two Microsoft Cloud offerings”, he added.

Microsoft has reported a five percent growth in its “Intelligent Cloud” division, which includes sales of its Azure public cloud services. However, the revenue from the Xbox hardware was on the decline because there were fewer sales. The software giant had 20.6 million Office 365 consumer subscribers as of the end of the quarter and recorded an 11% constant currency increase in Dynamics revenue. Search revenue was up 21 percent, while Xbox Live subscriptions rose by 30 percent.

Microsoft is still making a lot of money, but the company is doing it with Surface, Windows 10 and its cloud platform, and definitely not Windows phones. Windows OEM non-Pro revenue growth is down 3% year-over year, while Windows volume licensing revenue growth is down 4% year-over-year.