1 Cloud Growth2 Fall in Surface Sales
Net income told another positive tale, at $4.8 billion versus 3.8, and operating income fell by $300 million year-on-year.
Cloud Growth
Despite the disappointment from investors, Microsoft had a very positive quarter for cloud. The intelligent cloud division saw a rise of 11%, accounting for about 20% of revenues. That was powered, in part, by significant Azure growth, which was a huge 93%. There was also an increase in revenue for server products and cloud services, up 15%. Though Enterprise services revenue fell by 1%, it was offset by a growth in Premier Support services and computing. “Our results this quarter reflect the trust customers are placing in the Microsoft Cloud,” said CEO Satya Nadella. “From large multi-nationals to small and medium businesses to non-profits all over the world, organizations are using Microsoft’s cloud platforms to power their digital transformation.”
Fall in Surface Sales
Unfortunately, it wasn’t all positive news. Much of that investor disappointment came from a 7% fall in revenue for Microsoft’s personal computing division. Windows OEM revenue saw a revenue increase of 5%, and commercial products and cloud services 6. However, this was more than offset by a drop of 26% in Surface revenue. This echoes the need for a refresh in the line, which hasn’t seen a significant update for some time. Microsoft has been price cutting on top of that, leading to further declines. However, that could all change come next quarter, depending on what the company does at its spring event early next month. The Surface Pro 5 will allegedly have a Kaby Lake processor, and a release then could spur new purchases. It’s also worth noting that gaming revenue grew by 4% this quarter, despite new details about Project Scorpio. Of course, that includes metrics other than console sales, but it’s still looking good. Finally, Productivity and Business Process revenue managed to net a 22% increase. Office 365 experienced a revenue growth of 45%, with consumer subscriptions now at 26.2 million. LinkedIn also contributed to this category for the first time, with a sum of $975 million. In all, it’s a mixed bag for Microsoft. Though it’s a solid quarter, it seems investors wanted some more positive results from devices. With Scorpio around the corner and possible Surface releases, they should get their wish soon.
