Microsoft ended 2014 with a bang. Kind of.
The company beat analysts’ expectations of $26.3 billion in revenue with $26.5 billion in revenue for the second quarter of its fiscal year 2015. Revenue is therefore up 7.9 per cent year over year, compared with $24.5 billion for the year-ago quarter. Microsoft met estimates for profit with $5.86 billion (or 71 cents per share).
That said, net income fell 10 per cent from the same period last year. Microsoft is blaming $243 million of that drop on integration and restructuring expenses related to the purchase of Nokia's phone business. Other highlights include Surface revenue of $1.1 billion. It is up 24 per cent year over year, compared to the year-ago quarter.
Despite the momentum, Microsoft said it only sold 6.6 million Xbox One and Xbox 360 units in the quarter that ended on 31 December (a decrease from 7.4 million units sold in the year-ago quarter). After two years of decline, PC market growth isn't doing too well either. OEM revenue for Windows decreased 13 per cent in the second quarter.
In other words: Microsoft's old ways of bringing in revenue, such as Xbox and Windows, are struggling now, while things like Surface Pro 3 and Lumia devices are booming. Microsoft said it sold 10.5 million Lumia devices during the quarter, compared to the 8.2 million during the year-ago quarter. Commercial cloud revenue is growing too.
According to Microsoft, its cloud business has grown into the triple-digits for the sixth consecutive quarter, reaching an annualized revenue run rate of $5.5 billion. Keep in mind Satya Nadella, Microsoft's old cloud boss, is now serving as the company's chief executive, and this is the first holiday season with him leading Microsoft in a cloud-first direction.
Tune into Microsoft's conference call at 5:30 pm EST for more details on its earning results.