Microsoft has disclosed its financial results for the previous quarter, showing that the firm’s shift to cloud-based services is starting to pay off. Revenue from more traditional productivity tools was less impressive, however, and the personal computing platforms showed a slight dip.
The company said that it generated overall revenue of $25.7bn for the second quarter of its 2016 financial year, which covered the three months to the end of December 2015. This figure was down two percent on the same period last year, but up three percent in ‘constant currency’ figures when currency fluctuations are taken into account, Microsoft said.
As might be expected, Microsoft’s cloud services showed some of the best results, and the firm’s Intelligent Cloud division reported growth of five percent, or 11 percent with currency fluctuations taken into account.
Intelligent Cloud covers Microsoft’s Azure public cloud services, Enterprise Mobility solutions, and enterprise software and services, so includes figures for the Windows Server operating system, which saw revenue growth of 10 percent in constant currency, Microsoft said.
However, Microsoft chief executive Satya Nadella claimed that Azure revenue grew by 140 percent during the quarter, thanks to new deployments from customers such as NTT DoCoMo, Honeywell and NASA’s Jet Propulsion Laboratory.
“The enterprise cloud opportunity is massive – larger than any market we’ve ever participated in,” Nadella said on a conference call to discuss the financial results.
“Last quarter, I reflected on how we are now one of two leaders in this space. At the same time, we’re the only one in this market providing SaaS, PaaS, IaaS and hybrid cloud at scale, and we’re growing in each area simultaneously.”
Elsewhere, revenue for the Productivity and Business Processes division declined by two percent, although Microsoft claimed that this is actually a rise of five percent in constant currency and was “in line with expectations”.
This division covers Microsoft’s Office productivity tools, including Office 365 and the Dynamics business software lines, where Office consumer revenue declined by 14 percent, or eight percent in constant currency.
On the Windows side, revenue for the More Personal Computing division was down five percent, or two percent in constant currency, according to Microsoft. This division includes the Windows operating system, Microsoft’s Surface devices and smartphones and search advertising revenue.
The headline figure here is the phone revenue, which saw a decline of 49 percent in constant currency. Microsoft attributed this to a change in strategy announced last July. On the flip side, the launch of the Surface Pro 4 and Surface Book saw Surface revenue grow by 29 percent in constant currency.
Looking ahead, Microsoft expects to see a further shift towards cloud and services in its revenue results for the current quarter.
“We expect our commercial business to remain healthy, with an ongoing shift to annuity as new and existing customers adopt and use our commercial cloud services,” said Microsoft chief financial officer Amy Hood.