Microsoft results: Cloud rises, Windows declines

Microsoft's cloud computing operations saw strong signs of growth last quarter even as the Redmond-based company's sales were dragged down by falling demand from consumers.

Though revenues were of $21.73 billion in Microsoft's third quarter of fiscal 2015, ended 31 March, came in line with analysts' expectations, there were no signs of sustainable growth for the software giant.

Its sales, last quarter, rose 8 per cent, year-on-year, while this year sales saw 6.5 per cent growth.

Also even as the firm's earnings of $0.61 per diluted share exceeded Wall Street's expectations comfortably, its net income at $4.99 billion, was down 11.9 per cent from the year-ago quarter.

Once again, it was the PC market that drove down results. Redmond's Devices and Consumer Licensing segment covering sales of software like Windows and Office to the retail market, posted revenue of $3.48 billion, a 20.7-per cent decline from a year ago.

Also, the enterprise-focused Commercial Licensing group reported $10.04 billion in revenue – which, though impressive, was still a 2.8-per cent year-on-year decline.

However, it was the softness of the consumer market that did Microsoft in this quarter. The Computing and Gaming Hardware division's revenue fell 8.8 per cent from the year-ago quarter, to $1.8 billion.

CEO Satya Nadella said the revenue report marked a year-over-year increase of 6 per cent, while speaking on the company's quarterly earnings conference call.

Among other key financial metrics, Microsoft reported, was an operating income of $6.6 billion and a gross margin of $14.6 billion. Net income fell 12 per cent.

The company esplained that the financial report from this quarter included $190 million of costs related to restructuring and integration, and that results were affected by a stronger US dollar.

"It's clear that we are well on our way to transforming our products and businesses across all of Microsoft," Nadella said.

According to commentators, the term transformational was particularly accurate to describe the transition at Microsoft which reported tremendous success across cloud services and decline throughout Microsoft's traditional offerings. The company's commercial revenue was up 5 per cent to hit $12.8 billion.

Microsoft's commercial cloud business logged 106 per cent growth, and had a run rate of $6.3 billion marking an increase of $5.5 billion.