Satya Nadella’s leadership is making all the positive differences at Microsoft. Recently the company posted fiscal second quarter revenue of USD 25.69 billion, beating the analysts’ expectations of USD 25.26 billion (estimate from Thomson Reuters). The net income for the quarter was USD 6.3 billion.
Microsoft’s revenue gains for the year 2015 were dominated by Microsoft Surface and Microsoft’s Xbox. “Businesses everywhere are using the Microsoft Cloud as their digital platform to drive their ambitious transformation agendas. Businesses are also piloting Windows 10, which will drive deployments beyond 200 million active devices,” said Satya Nadella, CEO, Microsoft.
A break up of Microsoft products shows that Windows phone is still an area of concern for the company, as is Windows 10 but Surface, X-box, Microsoft commercial and cloud are more than making up the numbers.
#1. Microsoft Windows Phone revenue continue to slide: The Company sold only 4.5 million Lumias compared to the 10.5 million sold last year, resulting in a revenue decline of 49 percent. The number takes us all the way back to Q3 2012, which is the last time so few Windows Phones were sold. The IDC’s estimation of the number of smartphones that were sold is 399.5 million, which makes the market share for Windows Phones to only 1.1 percent for the quarter and 1.9 percent for the whole year. The year may see further declines in Windows phone market share, with no significant launches besides the Lumia 650 in sight.
#2. Microsoft Surface is beginning to surface: While Microsoft continues to experience a weak phone offering, Surface is looking good for the company alongside its impressive cloud and server growth. Surface revenue had dipped in the last quarter, however this time round it’s up year-over-year by 29 percent to USD 1.35 billion. Microsoft says Surface Book and Surface Pro 4 helped push overall Surface revenues.
#3. Windows 10, marred by PC decline: 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. The overall lower Windows and phone revenue has impacted the total revenue for Microsoft’s “more personal computing” efforts. However, Microsoft is now preparing significant updates to Windows 10 in the coming months, including improvements to its Cortana and Edge browser.
#4. Microsoft Xbox on the rise: 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 did not reveal exactly how many next-gen consoles it sold in the recent quarter.
#5. Commercial & cloud continue the high: Once again, Microsoft’s commercial products and cloud services are growing. In the latest quarter, Office 365 revenue grew 70 percent and Office 365 consumer subscribers increased to 20.6 million. It’s a 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.
Although 2015 was not the best year for Microsoft, the profitable growth of Surface and Xbox, as well as the update plans on Windows 10 might make 2016 a year Microsoft will look forward to.
