Microsoft Financial Results: Cloud on the Rise

Microsoft just released its financial results for the quarter elapsed between July and September of this year (that is, the first quarter of fiscal year 2016). In that period the company obtained 20.400 million dollars in revenue, which represents a drop of 12% compared to the same period last year, however,net profits increased by 2% year-on-year to $4.6 billion.

Despite the fact that at first glance there is nothing spectacular about these figures, the market has interpreted them very positively, making Redmond stock price jumps nearly 8% during after-hours trading, breaking records and reaching highest value in 15 years (since the dot com bubble burst).

Microsoft shares have risen nearly 8% after announcing its financial results. Since March 2000 they did not have such a high value.

To understand the reason for this optimism, it is necessary to analyze the detail of Microsoft's results. The good thing is that this is now easier to do than in other periods, since the company has begun to divide its financial information into categories that are more intuitive and consistent with its mission. These categories are:

1. Intelligent Cloud, which groups its products for servers and platforms such as Azure.
2. Productivity and Business Processes, which includes Office and other business solutions.
3. More Personal Computing, covering almost all consumer products such as Windows licenses, Lumia PCs, Xbox, Surface , and revenue from Bing and Xbox Live.

"

In this context, it happens that, although the division of more personal computing had quite bad results, reducing its income by 13 %, the other divisions are consolidating strong growth, especially intelligent cloud which grew 14% in revenues, and continues to position itself in the eyes of many as the future dairy cow>"

Lumia down

LUMIA EQUIPMENTCreate your own infographics

Within the area of ​​consumption and hardware, which in itself already showed downward results during the past quarter, the sale of Lumia mobile phones was the item where the most drastic decline was seen. Sales of this equipment slumped compared to the same period last year, going from 9.3 to only 5.6 million of equipment sold, a figure that is also a historical minimum of more than 2 years.

The most curious thing about this is that Microsoft does not present the low sales of Lumia as a problem to be reversed, but as ">

Surface is also down, but for other reasons

Quarterly revenue from the sale of Surfaces reached $672 million, down from $908 million of the same period of the previous year. However, in this case Microsoft justifies the decrease in sales by the difference in launch dates of new equipment.

Surface sales most likely to pick up next quarter and break new records

Last year the Surface Pro 3 launched in June, so sales in July, August and September 2014 were boosted by the new device coming to market. However, this year the release of a new model was postponed to October, which naturally leads to fewer sales in previous months, due to the slowdown normal of the previous generation, but also because consumers anticipate that a new model will come out in the coming months, and postpone their purchase until after that.

In summary, the case of Surface is totally different from that of Lumia, and more likely in the coming months its sales will pick up and break new records thanks to the enthusiasm for the Surface Pro 4 and Surface Book.

Bing is finally profitable

A very interesting thing that has happened this quarter is that, after years of losses, Bing is finally delivering benefits to the company , also achieving revenues of close to 1,000 million dollars.

Bing's now posting positive balances is due to both increased revenue and reduced costs. Recall that Microsoft has been cutting off from the unnecessary areas of Bing, outsourcing functions such as web management (now handled by AOL) and map data collection (which was sold to Uber).Microsoft wants the service to focus on organizing and displaying third-party maps, rather than spending resources updating its own maps.

20% of Bing searches come from Windows 10 devices

On the other hand, the spread of Windows 10 has also helped Bing, due to its strong integration with the search engine through Cortana. So much so that almost 20% of the searches carried out on Bing in September were initiated from Windows 10 devices. As a consequence of this increase in traffic, the income search engine have increased by 29% compared to the same period last year.

The Microsoft cloud continues to grow

As has become customary, the performance of Microsoft's cloud services is the most notable point of these financial results, generating at the same time the already mentioned optimism of investors regarding Nadella's company.

Revenue generated by Microsoft Azure increases by more than 135% "

As a whole, the intelligent cloud segment was $>5.9 billion (or nearly 30% of all Microsoft revenue in the last quarter). If we break down, we can see that revenue from server products grew by 14% year-over-year, while revenue generated by Microsoft Azure increased bymore than 135% compared to the same period in 2014."

Windows and Office

Finally, we cannot close this article without mentioning the company's most traditional sources of income: Windows and Office licenses, to which Office 365 subscriptions are now also added.

"

This last service has managed to maintain its growth of 3 million additional subscribers per quarter, thus reaching 18, 2 million subscriptions hired by consumers.Meanwhile, the revenue generated by Office 365 for companies increases by 70%, although an important part of that growth is simply cannibalization>."

Anyway, in the aggregate and considering licenses plus subscriptions Office manages to grow 5% year-on-year.

Windows shows opposite results. Revenues from manufacturers' licenses fell by 6%, in line with lower PC sales recorded in the last quarter. In any case, Microsoft points out that Windows revenues are falling to a lesser extent than those of the PC market.

More information | Microsoft