Microsoft doing well thanks to Azure

Microsoft campusSoftware king of the world, Microsoft is still able to coin it in,  thanks mostly to its Azure cloud product.

Microsoft reported earnings for its third fiscal quarter of 2016, including revenues of $22.1 billion. In Q3 2015, Microsoft saw $21.73 billion in revenues and most of the industry is having a snooze at the moment.

Wall Street had expected Microsoft to earn $22.09 billion in revenue so it did a little bit better than they expected.

Microsoft CEO Satya Nadella told the assorted throngs that organisations using digital technology to transform and drive new growth increasingly choose Microsoft as a partner.

“As these organisations turn to us, we’re seeing momentum across Microsoft’s cloud services and with Windows 10, ” he said, perhaps over optimistically.

That said the  results from Office and Office 365 (commercial and consumer customers), grew 1 percent to $6.5 billion. Office 365 had a relatively slow quarter, adding just 1.6 million subscribers to hit 22.2 million. Office commercial products and cloud services revenue grew 7 percent with Office 365 revenue up nearly 63 percent.

Steady Office 365 growth is not much of a surprise, but it does appear to be grinding to a halt. So it looks like Vole’s cunning plan to convert its traditionally most lucrative software business into a subscription revenue stream may be running out of steam.

This segment, which includes results from server products and services (including Windows Server and Azure), grew three percent to $6.1 billion.

Server products and cloud services revenue grew five percent. But Azure revenue, which grew 120 percent. Use of Azure compute and Azure SQL database more than doubled year over year.

Microsoft this quarter also shared that its commercial cloud business exceeded a $10.0 billion. The company previously projected that it expects this number to hit $20 billion by 2018.

Windows licensing and devices (Surface, phones, and Xbox), decreased 1 percent to $9.5 billion. Its OEM revenue also declined two percent. Vole put a brave face on this pointing out that the decline was acceptable because it still “outperforms the PC market.”

Microsoft saw Surface revenue jump from $713 million in Q3 2015 to $1.11 billion in Q3 2016. The Surface Pro 4 and the Surface Book seem to be selling well.

Steve Ballmer’s legacy to the company, its phone business revenue declined 46 percent. In Q3 2016, Microsoft sold 2.3 million Lumia devices, down from 8.6 million in Q3 2015 which is a 73 per cent fall.

Advertising revenue from this group, excluding traffic acquisition costs, grew 18 percent. Microsoft attributed this to Windows 10, which includes tighter Bing integration.

Xbox Live monthly active users grew 26 percent year over year. The service now has 46 million players, which is actually down from 48 million last quarter.