At the age of 40, some think that Microsoft should just defer to the new kids on the block and become a elderly statesman of still-massive profits and yet declining clout.
Not so fast.
The cloud story at Microsoft is finally starting to have an effect on the company’s earnings, pleasantly surprising investors who are alarmed about fast declining Windows revenues. Earnings per share of $0.61 and revenue of $21.73 billion smashed expectations of $0.51 and $21.06 billion, respectively.
Office, Cloud and Server
Consumer Office 365 gained 3.2 million new subscribers, up 35% since the previous quarter and reaching 12.4 million subscribers. iOS and Android Office apps have been downloaded over 100 million times.
Commercial cloud revenue grew by 106 percent, a now expected rate. Revenues now represent $6.3 billion.
Server revenues grew 12%.
Another success for this division saw revenues of $713 million, up 44% year over year on the strength of Surface Pro 3 and its accessories.
Microsoft sold 8.6 million Lumia smartphones, an 18% increase year over year. Phone revenue was $1.4 billion. 24.7 million non-Lumia handsets were also sold.
Low prices and Xbox 360 obsolescence are pushing both revenue and unit sales down. 1.4 million Xboxes were sold, down from 2 million. Platform revenue was down 24 percent.
Windows revenue continues to decline as the company transitions to other profitable products. Pro revenue fell by 19% while non-Pro declined by 22%. Volume licensing decline by 2%.
Nadella’s experience with the cloud business and his reorientation of the company around that type of product is paying dividends. The company is slowly shedding its reliance on Windows, with the OS market no longer providing the margins that it once did. Devices continue to grow and provide more of a base for services such as Office 365 and Xbox Live.