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Published: Sat, October 24, 2015
Economy | By Melissa Porter

Microsoft lifts profits while revenue slips

Microsoft lifts profits while revenue slips

Revenue came in at $20.4 billion, down 12 percent year over year, while income came in at $5.8 billion, down just 1 percent from the same time last year. The analysts had expected a revenue of around $21 billion and EPS of 59 cents.

Microsoft delivered a big earnings beat for the September quarter, sending its stock to a more-than-15-year high in after-hours trading Thursday.

Microsoft CEO Satya Nadella says: "customer excitement" for his firm's Windows 10 and cloud services is up.

Offsetting those gains was a 17% - 13% in constant currency - decline in revenue for Microsoft's personal computing segment, to $9.4 billion, due mostly to a weak global PC market.

For the Productivity and Business Processes segment, the company stated that in constant currency, Office's commercial products and cloud services sales went up 5% YoY, and Office 365's sales rose nearly 70% YoY. In terms of earnings, Microsoft reported that its phone unit revenues fell 54 percent over the past quarter - in keeping, it said, with Nadella's strategy to limit the size of that unit, which it purchased from Nokia. Gaming revenue as a whole grew by 6 percent, however.

Microsoft's revenue dipped to $20.4 billion compared to $23.2 billion a year ago.

On the Windows side of things, despite having more than 110 million installs of Windows 10, the company said that Windows OEM revenue declined 6%. Surface revenue also fell year-on-year, down from $908 million to $672 million in the last quarter.

Microsoft recently unveiled new products largely aimed at the consumer market including its first laptop computer, the Surface Book as well as an updated tablet and two high-end smartphones that aim to help turn around its struggling mobile-phone business. Microsoft added about three million new Office 365 subscriptions during the quarter bringing the total to 18.2 million.

The Intelligent Cloud segment includes results from public, private and hybrid server products and services such as Windows Server, SQL Server, System Center, Azure, and Enterprise Services. Microsoft also saw a decline in Surface hardware sales.

People walk past a Microsoft office in New York on October 6, 2015. "Right now, companies like IBM are facing massive headwinds because their business models are not equipped to successfully transition into the cloud as Microsoft".

Dell has worked for years with Microsoft on Microsoft Windows.

Microsoft attributed the success of its search engine to solid Windows 10 adoption and usage.

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