Microsoft earnings show strong Surface sales but a withering Windows phone – The Verge

Microsoft has published its Q2 fiscal 2016 earnings report, and the company has made $6.3 billion in net income on $25.7 billion in revenue. While Microsoft continues to experience a weak phone offering, Surface is looking good for the company alongside its impressive cloud and server growth. Microsoft continues to move away from relying on Windows for money, but its cloud and server offerings are helping to balance its revenue losses with Windows.

Surface revenue dipped last quarter, and this time it’s up year-over-year by 29 percent to $1.35 billion. Microsoft says Surface Book and Surface Pro 4 helped push overall Surface revenues. At the same time, Microsoft’s Windows Phone revenue continues to slide, falling 49 percent year over year. Microsoft may have launched the Lumia 950 and Lumia 950 XL recently, but the company is significantly altering its phone efforts and the amount of devices it brings to market. Microsoft only sold 4.5 million Lumia phones in the recent quarter, compared to the 10.5 million sold last year. It’s a clear sign of the fate of Windows Phone.


Windows 10 may have debuted six months ago, but the PC is still on the decline. Microsoft’s Windows OEM Pro revenue declined 6 percent in the latest quarter. That’s not as bad as last year’s 13 percent decline, but the overall lower Windows and phone revenue impacted the total revenue for Microsoft’s “more personal computing” efforts. Microsoft is now preparing significant updates to Windows 10 in the coming months, including improvements to its Cortana and Edge browser. We’ll hear more about the updates at the company’s upcoming Build developer conference in March.

Xbox Live monthly usage has grown a lot

On the gaming side, Microsoft notes that Xbox Live monthly active users grew 30 percent year-over-year to 48 million. However, Xbox hardware revenue declined because of lower volumes of Xbox 360 sales. That’s to be expected with sales shifting over to the Xbox One, but Microsoft isn’t revealing exactly how many next-gen consoles it sold in the recent quarter.

Once again, Microsoft’s commercial products and cloud services are growing. Office 365 revenue grew 70 percent, while Office 365 consumer subscribers increased to 20.6 million in the latest quarter. It’s the latest sign that consumers and businesses continue to subscribe to Microsoft’s cloud-based version of Office. Microsoft’s server products and cloud services revenue grew 10 percent this quarter, alongside a big Azure revenue increase of 140 percent.

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