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Microsoft better than expected results due to cloud success

by Mark Tyson on 23 October 2015, 10:16

Tags: Microsoft (NASDAQ:MSFT)

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Microsoft has published its latest quarterly results covering the three months ending on 30th September 2015. This, its Q1 2016 quarter, saw the software (and devices) giant generating $20.4 billion in revenue and make $4.6 billion in profit. As Reuters notes, this is Microsoft ninth quarter in a row of reporting better than expected adjusted revenue.

Although Microsoft CEO, Satya Nadella, touted strong growth across its main ambitions, it is the firm's cloud products which have helped inspire investors in after hours trading. Microsoft's shares have hit a 15 year high, notes the FT, and have been up as much as nine per cent pre-market (currently 7.4 per cent up). Profits grew 11 per cent year on year if you use 'constant currency' for comparisons but due to exchange fluctuations the GAAP profit amount was up just two per cent.

Nadella's results statement read as follows; "We are making strong progress across each of our three ambitions by delivering innovation people love," said Microsoft's CEO. "Customer excitement for new devices, Windows 10, Office 365 and Azure is increasing as we bring together the best Microsoft experiences to empower people to achieve more."

Preferring to use constant currency in listing the most recent quarter's achievements, Microsoft highlighted the following results:

  • Office 365 revenue growth of nearly 70 per cent in constant currency. Subscribers reached 18.2 million – that's approx 3 million up this quarter.
  • Dynamics revenue grew 12 per cent in constant currency, with the Dynamics CRM Online enterprise installed base growing more than 3x year-over-year.
  • Server products and cloud services revenue grew 13 per cent in constant currency.
  • Azure revenue and compute usage more than doubled year-over-year.
  • Enterprise Mobility customers more than doubled year-over-year to over 20,000, and the installed base grew nearly 6x year-over-year.
  • Search advertising revenue excluding traffic acquisition costs grew 29 per cent in constant currency with Bing US market share benefiting from Windows 10 usage.
  • Xbox Live monthly active users grew 28 per cent to 39 million.

But Personal Computing declined, whichever accounting practices were applied; this revenue stream was down 13 per cent in constant currency and down 17 per cent using GAAP. Phone revenue declined 54 per cent in constant currency.

As you can see from the above highlights Microsoft's cloud services were star performers. Reuters notes that in Amazon's 'surprise profits' result yesterday, cloud services played an important part in its revenues. This is also the first quarter for Microsoft where Bing, launched in May 2009, has become a profitable business.

In other Microsoft related news today the number of Surface Book SKUs has grown to seven. Microsoft has introduced a new 'low end' model with Nvidia dGPU at $1,699, and the top end has been capped by a 1TB storage model costing $3,199.

HEXUS Forums :: 4 Comments

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Those are some impressive figures, lets see if they keep up this upwards trend and if MSoft can keep the growth going
They seem more like well manipulated figures to me what with comparing GAAP percentages from last year/quarter with “constant currency” percentages, and saying things like Xbox users grew 28 per cent to 39 million when its only gone up by 2 million.
They seem more like well manipulated figures to me what with comparing GAAP percentages from last year/quarter with “constant currency” percentages, and saying things like Xbox users grew 28 per cent to 39 million when its only gone up by 2 million.

They don't *seem* like manipulated figures to me; I know they are manipulated because it is stated that they are. :)

It's quite common to strip out currency fluctuations to demonstrate the underlying growth. To provide both sets of figures gives us all the information we need.

Xbox users grew by 30% from the rounded figures supplied (from 30 to 39). 28% has been calculated using the non-rounded figures.

A good set of results from a company with another decent product in the pipeline: the HoloLens.
I'm really looking forward to all the VR offerings coming our way.
They did? I must have missed where the said they manipulated the figures.

Providing both sets of figures is a bit different than being selective in what numbers are used in the highlights, in the summarisation of the earning report, don't get me wrong i consider even the smallest profit to be a positive, i just don't get why there's a need to massage the underlying figures to make them sound better.