Microsoft today reported earnings for its second financial quarter of 2016 (I know, that’s weird, but Microsoft’s financial year ends in June). The company reported non-GAAP revenue of $25.7 billion for the last quarter and $0.78 of adjusted per-share profit.
Wall Street expected Microsoft to deliver an EPS of $0.71 on revenue of $25.26 billion.
In the year-ago quarter, the company reported revenue of $26.5 billion and earnings of $0.71.
Microsoft’s stock shot up over 7 percent right after the earnings were announced.
“Businesses everywhere are using the Microsoft Cloud as their digital platform to drive their ambitious transformation agendas,” said Satya Nadella, chief executive officer at Microsoft. “Businesses are also piloting Windows 10, which will drive deployments beyond 200 million active devices.”
Last quarter, Microsoft broke out results for its different business units for the first time and thankfully, the company didn’t make any changes to this process this time around. Here is what its results look like when we break them down by business unit.
- Productivity and Business Processes (PBP), including Office, consumer Office, and Dynamics: $6.7 billion compared to $6.3 billion in revenue last quarter. Office 365 now has 20.6 million subscribers.
- Intelligent Cloud (IC), which includes service revenue and Enterprise Services: $6.4 billion compared to $5.9 billion in the last quarter.
- More Personal Computing (MPC), which contains Windows, Devices, Gaming and Search: $12.7 billion. Last quarter, the company reported $9.4 billion in revenue for this group. This was largely driven by increased sales of Microsoft’s surface line which hit $1.35 billion in revenue this quarter, though phone revenue expectedly declined by 49 percent.
Last quarter, Microsoft also announced that its commercial cloud business was on an $8.2 billion annual run rate. This quarter, the company updated this number to $9.4 billion. Microsoft previously said that it expects this number to hit $20 billion in 2018.
As Microsoft’s director of investor relations Zack Moxcey told me right after the numbers were announced, he still feels good about this projection.
The company today stressed that its performance in the cloud strengthened its results. Revenue from server products grew 10 percent, for example, and Azure revenue grew 140 percent.
Microsoft also made some headway in monetizing its search ads. Revenue there was up 29 percent, the company today announced. Moxcey largely attributed this to the integration of search into Windows 10.