Adjusted revenue during the quarter, the third of Microsoft's 2016 fiscal year, was $22.1 billion, meeting analysts' expectations. And this quarter, the Redmond giant has missed analyst estimates, recording $22.1 billion and earnings per share (EPS) of $0.62 billion against the Wall Street expectations of $22.09 billion revenue and $0.64 EPS.
Microsoft's chief executive Satya Nadella has focused on developing the company's cloud business since he took over in early 2014, with his "mobile first, cloud first" strategy.
Similar to Azure, Office 365 continued to grow, reaching 22.2 million consumer subscribers, up from 12.4 million a year earlier. Microsoft last month said 270 million active devices run the new version, though many of those are free upgrades that bring no revenue.
Windows OEM revenue is down two percent in constant currency, but Microsoft says this performance is actually better than that of the PC market as a whole.
Revenue for the Intelligent Cloud segment should come in between $6.5 billion and $6.7 billion.
Revenue in its cloud business, which includes Azure, rose 3.3% to $6.1bn, but operating profits at the division shrank 14%.
Microsoft Corporation (NASDAQ:MSFT)'s March quarter (F3Q2016) bucked the recent trend in its Intelligent Cloud segment where Azure cloud belongs.
But Microsoft reported gains for its Office software and in business cloud computing, including a 120 per cent revenue surge for its Azure cloud platform for enterprises.
Cloud-based and digital transformation-related services are making strong contributions to Microsoft's bottom line, while its PC sales have proven to be a drag and Windows Phone revenues are crashing, the company reported yesterday.
Going ahead, Microsoft is looking for revenue in the band of $6.5 to $6.7 billion in its Productivity and business process division.
Microsoft's mobile revenue therefore fell by as much as 46 per cent Still, the company saw growth from Surfaces.
A particular bright spot was Surface revenue, which grew 61pc during the quarter. That's a massive 73% drop from the same quarter a year ago, when the company sold 8.6 million phones. Improved profit margins were driven by lower expenses in Microsoft's phone business, which the company scaled back drastically past year, and sales of Surface portable devices.
The company did reveal some growth on the Xbox side of things, recording a 26% year-on-year rise in Xbox Live users, to 46 million.
Source: Microsoft Q3 2016 Earnings Report Shows Windows Phone Drop, Surface Rise
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