Windows Phone sales down by half compared to a year ago

But it’s likely the company’s cloud business that has investors excited.

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.

Microsoft will endeavour to arrest the decline in the current quarter with the launch its new high-end Windows Phone devices, the Lumia 950 and Lumia 950 XL, in the current quarter. Microsoft is also banking on enterprises to help improve Windows 10 adoption rates.

Microsoft returned $6.5 billion to shareholders in dividends.

As for the figures, in its first fiscal quarters, which ended on 31 December, the net income that was reported is almost $5 billion, or 62 cents a share, compared with $5.86 billion, or 71 cents a share, during the same period a year earlier.

Revenue was down to $23.8bn and profit fell to $5bn, mainly as a result of the strong dollar and shrinking PC market that has affected the fourth-quarter results of most U.S. tech firms.

The Intelligent Cloud division produced underlying revenue growth of 11%, driven by 10% growth in server and cloud service revenues and 140% revenue growth at Azure, Microsoft’s cloud computing platform for building and deploying applications and services through a global network of Microsoft-managed datacenters. 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. Last quarter, the company reported $9.4 billion in revenue for this group.

Revenue from Microsoft Azure, which challenges cloud king Amazon Web Services, more than doubled while its overall “Intelligent Cloud” unit grew five percent to US$6.3 billion, according to the earnings report. 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.

However, Nadella said businesses are piloting Windows 10, which he expects will drive deployments beyond 200 million active devices. On the smartphone side of things, Microsoft’s Windows Phone revenue fell 49 percent year over year. Search revenue was up 21 percent, while Xbox Live subscriptions rose by 30 percent.