Microsoft financials raise doubts over the future of Windows Phone

Barely two years into Satya Nadella's tenure as Microsoft CEO, the once-passé tech giant continues to gain ground, as evidenced by Thursday's quarterly earnings report. A year ago, the company revenue was $26.47 billion.

During the quarter, Microsoft returned $6.5 billion to shareholders in the form of share repurchases and dividends.

Finally Personal Computing revenue is down 5% ( or 2% in constant currency) mainly thanks to the declining revenue from OEMs licensing Windows. But the big highlight was Azure revenue, which grew 140 percent, including revenue from Azure premium services growing almost 3x year-over-year.

For the quarter, Redmond reported non-GAAP revenue of $25.7 billion for its second quarter, with adjusted earnings per share $0.78. Other companies like Google and IBM lag behind, as Microsoft's growth in cloud accelerates.

The company reported a rise in unearned revenue balances of $19.8bn, up 8% in constant currencies, representing services that have been paid for up front, but not yet delivered.

All that Microsoft needs right now is a strong growth oriented long-term strategy in the smartphone segment that should be centered around a more efficient and robust Windows 10 Mobile iteration. Subscriptions for Office 365 productivity software also lured both businesses and consumers, and even Windows sales came in better than the overall PC market, fueled by the adoption of Windows 10.

Moreover, Personal Computing has been hit by Microsoft's inability to make a space for itself as a phone platform.

The number of people using the Xbox Live service for digital content and video games climbed 30% to a record 48 million.

Microsoft also fared well with its Office 365 cloud product, a major part of the "intelligent cloud" sector, which saw revenue growth of almost 70% in constant currency. Office 365 subscribers grew to 20.6 million and Windows 10 is now on more than 200 million devices.

"They nailed the cloud", said Matt Howard, a venture capitalist at Norwest Ventures who monitors Microsoft closely.

This segment, which includes results Windows licensing and devices (Surface, phones, and Xbox), declined 17 percent to $9.4 billion.

Source: Microsoft financials raise doubts over the future of Windows Phone