Cloud growth buoys Microsoft while revenue shrinks

The company's fiscal Q1 growth was driven by cloud successes but hurt by exchange rates and phone losses

Microsoft's cloud successes buoyed the company through its last quarter, which was otherwise a mixed financial bag.

Revenue fell more than 12 percent from a year earlier to US$20.4 billion, though profit grew almost 2 percent to $4.62 billion.

Like other companies, Microsoft cited currency exchange rates for its revenue drop. They had a pronounced effect on some of the company's key metrics. For example, Office commercial products and cloud services revenue declined 2 percent, but grew by 5 percent when evaluated on a "constant currency" basis, which is a metric designed to smooth over the impacts of currency fluctuations.

If there was one other albatross around Microsoft's neck, it was its "More Personal Computing" segment, which includes Windows licensing and phone hardware. Revenue for that segment declined 17 percent to $9.38 billion. Currency accounted for part of that, but phone hardware sales hit the division hard. They were down 58 percent year-over-year. That reflects the company's reduced focus on phones. Earlier this year, Microsoft announced that it was cutting 7,800 jobs, primarily in its phone hardware division.

Windows licensing revenue from both computer manufacturers and volume licensing deals declined across the board year over year, reflecting the slowing PC market. However, revenue from the Surface division also slowed down, coming in at only $672 million compared with $908 million a year earlier, when customers were flocking to the newly introduced Surface Pro 3. The Surface sales probably were also dampened by buyers waiting for the Oct. 6 announcement of the new Surface Pro 4 tablet and Surface Book laptop.

The company's cloud segment, which includes revenue from the Azure cloud platform, Windows Server software and Enterprise Services division, was its shining star for the quarter. That segment grew 8 percent year over year, thanks to growth in Azure and premium server products. Compute usage on Microsoft Azure more than doubled year over year, which is a good sign for the company's overall ambitions as a cloud platform provider.

In more good news, Office 365's subscriber base grew across both consumer and commercial markets. Right now, the company has 18 million consumer subscribers to its productivity software-as-a-service offering, and it said Office 365 commercial seat licenses grew 66 percent year over year. That's well below the 96 percent rise the company saw during the year-earlier period, but that growth was coming off a much smaller base.

The firm did beat Wall Street's expectations, however, which was enough to send its stock price up more than 6 percent in after hours trading.

Join the PC World newsletter!

Error: Please check your email address.

Tags Microsoft

Our Back to Business guide highlights the best products for you to boost your productivity at home, on the road, at the office, or in the classroom.

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Blair Hanley Frank

IDG News Service
Show Comments

Most Popular Reviews

Latest News Articles

Resources

PCW Evaluation Team

Azadeh Williams

HP OfficeJet Pro 8730

A smarter way to print for busy small business owners, combining speedy printing with scanning and copying, making it easier to produce high quality documents and images at a touch of a button.

Andrew Grant

HP OfficeJet Pro 8730

I've had a multifunction printer in the office going on 10 years now. It was a neat bit of kit back in the day -- print, copy, scan, fax -- when printing over WiFi felt a bit like magic. It’s seen better days though and an upgrade’s well overdue. This HP OfficeJet Pro 8730 looks like it ticks all the same boxes: print, copy, scan, and fax. (Really? Does anyone fax anything any more? I guess it's good to know the facility’s there, just in case.) Printing over WiFi is more-or- less standard these days.

Ed Dawson

HP OfficeJet Pro 8730

As a freelance writer who is always on the go, I like my technology to be both efficient and effective so I can do my job well. The HP OfficeJet Pro 8730 Inkjet Printer ticks all the boxes in terms of form factor, performance and user interface.

Michael Hargreaves

Windows 10 for Business / Dell XPS 13

I’d happily recommend this touchscreen laptop and Windows 10 as a great way to get serious work done at a desk or on the road.

Aysha Strobbe

Windows 10 / HP Spectre x360

Ultimately, I think the Windows 10 environment is excellent for me as it caters for so many different uses. The inclusion of the Xbox app is also great for when you need some downtime too!

Mark Escubio

Windows 10 / Lenovo Yoga 910

For me, the Xbox Play Anywhere is a great new feature as it allows you to play your current Xbox games with higher resolutions and better graphics without forking out extra cash for another copy. Although available titles are still scarce, but I’m sure it will grow in time.

Featured Content

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?