Microsoft Sees Commercial Cloud Strength in Challenging Q2 2016 Results

Office 365 now has 20.6 million consumer subscribers. The commercial cloud revenue run rate has eclipsed $9 billion, a 70% increase over the year-ago period.

Overall, Microsoft reported net income of $6.3 billion on non-GAAP fourth-quarter revenue of $25.7 billion.

To be fair to Microsoft it wasn't helped by the strength of the USA dollar versus other currencies, a factor that has hit other companies like Apple and IBM, among others.

A division it calls "Intelligent Cloud", which includes both Azure cloud business and Windows Server software sales, filed revenues of $6.3bn in the quarter, up by five per cent. Conversely Windows Phone revenue dived dramatically, it was cut in half in constant currency, apparently following Microsoft's cunning plans and "reflecting our strategy change announced in July 2015".

But Microsoft's Azure cloud, which looks to compete with Amazon Web Services and Google's Cloud Platform, is still hiding behind the company's stealthy way of reporting financial results.

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. Revenue from its own Surface line of computers and tablets rose to $1.35 billion from $1.1 billion a year earlier.

Matt Howard, a venture capitalist at Norwest Ventures, said Microsoft had "nailed the cloud".

One thing to note about Microsoft's earnings report is the decline of its smartphone business, with revenue falling by 49 percent. The company made a decision to lay off thousands of people from its phone division previous year and refocus on building a relatively small number of Windows Phone handsets rather than keep making the broad range of phones that Nokia had prior to its acquisition in 2014.

Azure revenue grew 140 percent with revenue from Azure premium services growing almost 3x.

Microsoft's gaming and digital content busine ss reported similar growth, with Xbox Live monthly active users growing 30% year-on-year in the quarter to a record 48 million.

The quarter highlighted continued weakness in Microsoft businesses tied to a sluggish personal computer market, including sales of traditional Office software and Windows operating systems to businesses.

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Source: Microsoft Sees Commercial Cloud Strength in Challenging Q2 2016 Results