Microsoft Slips 2% After Reporting $26.5B In FQ2 Revenue, $1.1B In Surface Revenue

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Today after the bell, Microsoft reported the financial performance of the second quarter of its fiscal 2015, including revenue of $26.47 billion and earnings per share of $0.71. The financial markets had expected the company to earn $0.71 per share on revenue of $26.33 billion.

Down less 1 percent in regular trading, Microsoft is down 2 percent after hours.

The company’s revenue’s were up 8 percent compared to the year ago period, and its earnings per share were down 7 cents, or around 9 percent. For the fiscal period, the company reported operating income of $7.8 billion, and gross margin of $16.3 billion. The company ended the quarter with $90.25 billion in cash and equivalents. By my rough math, that makes Microsoft still frakking rich.

The company’s Devices and Consumer division reported revenue of $12.9 billion, up 8 percent on a year-over-year basis. The company’s other core element, its Commercial revenue ticked up 5 percent to $13.3 billion compared to last year’s equivalent financial period.

Hardware

Microsoft sold 10.5 million Lumia phones in the quarter, bringing in revenue of $2.3 billion. The company sold $1.1 billion worth of Surface hardware. Those figures compare to the sequentially preceding quarter’s tally of 9.3 million Lumia devices sold, $2.6 billion in phone revenue, and $908 million in Surface revenue.

The company sold 6.6 million Xbox consoles during the holiday quarter. The company did not break out the mix of Xbox 360 and Xbox One consoles, however.

The Surface and Lumia numbers are strong, all time highs.

The Cloud

According to Microsoft, its commercial cloud revenue grew 114 percent compared to the year-ago period. In the sequentially preceding quarter, the company noted a 128 percent rise. It ended the current quarter on a $5.5 billion run rate. Update: I accidentally put a FQ4 2014 figure into this for the company’s past commercial cloud run rate, calling it a FQ1 2015 statistic. I have removed the number, and am horribly embarrassed. 

On the consumer side, Office 365 sold to the masses picked up 2.2 million subscribers to end the quarter at 9.2 million. The company ended its previous with 7 million subscribers for consumer Office 365 — so, Microsoft grew that figure by 31 percent in a quarter.

Windows

Here’s how Windows performed across its three main revenue silos:

  • Windows OEM Pro revenue declined 13%; revenue was impacted by the business PC market and Pro mix returning to pre-Windows XP end of support levels and by new lower-priced licenses for devices sold to academic customers

  • Windows OEM non-Pro revenue declined 13%, with license growth from opening price point devices

  • Windows volume licensing revenue increased by 3%, with annuity revenue growth partially offset by declining transactional revenue

All told, it was a solid quarter for the company, but not a corker when it came to raw financial performance. Microsoft has been on something of a product roll lately, with its Windows 10 operating system picking up decent early reviews, and its Surface Hub and HoloLens devices stoking mass-market interest. Today earnings underscore that uptick in corporate momentum.

Cloud and devices each did well. Windows had a predictably rough quarter. The metamorphosis of Redmond continues.