Microsoft’s $25.7 Billion In Quarterly Revenue & $0.78 EPS Beat, Shares Up

Surface, Office, Bing and Cloud Services were up; phone revs fell 49 percent.


Microsoft this afternoon announced non-GAAP holiday quarterly revenue of $25.7 billion, net income of $6.3 billion and $0.78 EPS. These numbers beat both top and bottom line consensus analyst estimates. The company’s stock is up in after-hours trading.

Bing search revenue grew 21 percent (but was down sequentially), boosted by Windows 10 adoption according to the company. Windows OS revenue was down 5 percent but not as much as the PC industry as a whole. Mobile phone revenues were down 49 percent.

Sales of Surface Pro 4 and Surface Book generated revenue growth of 29 percent year over year. Cloud services (Azure) grew 140 percent. Office 365 saw 70 percent revenue growth and now has 20 million consumer subscribers.

MSFT Q2 revenues

Here are some of the segment highlights verbatim:

  • Search advertising revenue ex-TAC grew 21 percent in constant currency with continued benefit from Windows 10 usage
  • Windows OEM revenue declined 5 percent in constant currency, outperforming the PC market, driven by higher consumer premium and mid-range device mix
  • Surface revenue increased 29 percent in constant currency driven by the launch of Surface Pro 4 and Surface Book
  • Phone revenue declined 49 percent in constant currency reflecting our strategy change announced in July 2015
  • Office 365 consumer subscribers increased to 20.6 million
  • Azure revenue grew 140 percent in constant currency with revenue from Azure premium services growing nearly 3x year-over-year
  • Xbox Live monthly active users grew 30 percent year-over-year to a record 48 million

Microsoft Q2 earnings Bing segment

As with Apple and other US companies operating internationally, “currency headwinds” took a toll on Microsoft’s earnings. Performance was better in constant currency vs actual currency, whose volatility vs. the US Dollar is the result of global economic instability.

Selected notes from the earnings call:

CEO Satya Nadella:

  • Microsoft’s commercial cloud run rate surpassed $9 billion. Nadella says that the cloud segment is massive, larger than any market Microsoft has encountered. Microsoft is one of the two leaders in the space.
  • Windows 10 is outpacing adoption of any of the company’s previous operating systems. There are now 200 million devices running Windows 10
  • Consumer response to Office 2016 and 365 has been very enthusiastic. Nadella says Office downloads have been very successful on iOS and Android devices.
  • Machine learning and AI will be at the core of business systems going forward. He discusses Cortana analytics adoption
  • 30 percent of search revenue came from Windows 10, partly because of user engagement with Cortana
  • Surface sales $1.3 billion (Surface Pro and Surface Book)

CFO Amy Hood:

  • Microsoft saw higher search volumes and higher revenue per search. She says that Bing will continue to grow share and revenues
  • Devices revenues decreased 26 percent, mostly because of phone revenue declines of 49
  • Outlook: Phones will continue to decline, but Surface Book and Surface Pro 4 are expected to grow

Analyst questions:

There were numerous questions about the macro-economic environment and what was Microsoft seeing “out there.”

More questions focused on the growth of Microsoft’s cloud-services business and the opportunity going forward.

CFO Amy Hood also discussed the strength of the Microsoft advertising business (search + display) and the Surface device business. She says that the company will be taking Surface devices into the enterprise.

Question re opening up Office to third party platforms and has that provided lift. Nadella didn’t respond directly but said that overall “we want to make sure that the Office subscription is accessible across all devices.” This is consistent with Microsoft’s cloud strategy — consumers or business users can access Office on any device.

By: Greg Sterling

Source: Marketingland

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Microsoft to Donate $1 Billion in Cloud Services to Nonprofits and Researchers

Microsoft plans to give away $1 billion in cloud services to nonprofits and university researchers over the next three years, as the company updates its philanthropic initiatives to reflect shifts in technology.


The company’s chief executive, Satya Nadella, intends to announce the company’s commitment Tuesday evening in Davos, Switzerland, at the World Economic Forum, the annual meeting of business and political leaders. The plan is intended to make it easier for nonprofits and researchers to gain access to the same cloud computing tools that have enabled business to become more nimble and tackle big technical challenges.

Brad Smith, the company’s president and chief legal officer, said other organizations outside the corporate sector have been slower to adopt cloud services. “It’s important that we enable the nonprofit community to make the transition to the cloud services era,” he said in an interview.

Microsoft’s cloud services include Azure, which allows organizations to host their own websites and online applications in Microsoft’s data centers, as well as Power BI, Dynamics CRM Online and other Microsoft-made applications for running organizations. CRM Online, for instance, is a customer relationship management service that can be useful for nonprofits in accepting financial contributions from individual donors.

Microsoft has been giving away traditional software for years. Mr. Smith estimates the value of those software donations at about $750 million a year and said that they will continue even as Microsoft gives away cloud services.

Microsoft hopes to give away its cloud services to 70,000 nonprofits in the next three years. The company plans to expand by 50 percent an existing program that donates Azure storage and computing resources to university projects. The company will also invest in low-cost Internet access technologies in developing countries.

Philanthropic giveaways from technology companies are sometimes viewed by critics as thinly veiled efforts to make money even if they’re not making direct sales to the recipients of the donations.Facebook‘s effort to provide free Internet access to the developing world through its initiative has come under attack fromnet neutrality activists in India who see it as a way of promoting Facebook services to the detriment of those from rival companies.

Microsoft says it will not take a tax deduction for the donated cloud services.

Mr. Smith said that Microsoft decided against creating an independent foundation for its philanthropic efforts because it believed the effort would have more impact if it was part of the company.

“Our philosophy is that philanthropy, at its best, often combines doing well with doing good,” he said. “One of the defining characteristics of Microsoft in 2016 is the degree to which we’re a mission-driven company. We rely most fundamentally on products and the market to fulfill that mission.”

Microsoft Is Making Its Own SIM Cards For Windows Devices


Short Bytes: Microsoft is working to make its own SIM cards that will help Windows 10 users avoid the messy contract schemes of cellular carriers. This SIM card will work with a new “Cellular Data” app that’ll let you buy mobile data using your Microsoft account.

 Anew app from Microsoft has been spotted on Windows Store that allows the Windows 10 users to access the internet data without a contract. The new “Cellular Data” app gives a user the choice to buy a data plan using the Microsoft account and access the internet easily.

This app suggests that Redmond is developing its own SIM cards that will be compatible with Windows devices. While the company hasn’t revealed the exact markets where it would sell the SIM cards, Windows Store information about Cellular Data app mentions that the service will be available in domestic markets with international roaming in the pipeline.

The company explains on Windows Store: “Now you can buy and use mobile data at your own convenience. Purchase a plan via Windows Store anywhere network coverage is available”.

microsoft sim card

The company adds that Cellular Data app works solely with some particular Windows 10 devices and needs a Microsoft SIM card.

Features of Microsoft SIM card and Cellular Data app:

  • Get online anywhere regardless of Wi-Fi availability.
  • Purchase cellular data when and where you need it – no fixed contracts.
  • Experience a more secure network using cellular connectivity.
  • Get in control of cost and data usage by checking your balance in real-time.

While it would be unfair to compare the service directly to Google’s Project Fi, Microsoft is taking some inspiration from search engine giant and learning some new tricks to make things easier for its users. It’s possible that Microsoft is busy planning to enter into partnerships with mobile carriers to create its own mobile network.

Microsoft could also adopt a strategy similar to Apple’s own SIM cards for providing cheaper internet services.

About the launch date, partner carriers and pricing details, we’ll have to wait and see.

Source: fossbytes