Microsoft reports solid quarter driven by cloud and devices

Microsoft has reported revenues of $23.2bn for the quarter ended 30 September, up by 25% from the same period in 2013

Microsoft has reported revenues of $23.2bn for the quarter ended 30 September 2014, up by 25% compared with the same period in 2013, driven by cloud and smartphone sales.

With Windows business sales up by just 10% and consumer sales down by 1%, analysts said this past quarter proves Microsoft is no longer reliant on sales of its operating system.

In stark contrast, sales of cloud services to businesses grew by 128% in the quarter, indicating a shift in focus under the leadership of Satya Nadella, who took over as chief executive in February 2014.

In a conference with analysts, Nadella said he was pleased with the progress in evolving Microsoft culture to be “fast, innovative, partner-friendly and customer-obsessed”.

“We are innovating faster, engaging more deeply across the industry, and putting our customers at the centre of everything we do – all of which positions Microsoft for future growth,” he said.

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In further proof Microsoft is making strides in adapting to new business models, Microsoft Office now has seven million subscribers to Office 365, an increase of 25% compared with 2013. Nadella said commercial seats for Office 365 nearly doubled.

“We continue to invest in growing our leadership position in areas with great opportunity. To that end, we’re expanding our datacentre capacity to meet demand,” he said.

Microsoft’s move into devices is also proving successful, with more than $900m in tablet sales mainly due to the success of the Surface Pro 3.

Total Xbox console sales were 2.4 million, growing by 102%, while Xbox One launched in 28 markets.

Phone hardware revenue exceeded $2.6bn, accounting for more than 11% of the total revenues for the quarter.

“With phone, we have moved quickly to integrate the business. We are executing on all of the restructuring changes we talked about in the past quarter while driving Lumia share growth,” Nadella told analysts.

We will continue to invest in high-growth opportunities and drive efficiencies across the organisation

Amy Hood, Microsoft

“I am pleased with the progress we’re making, things all across the company are rallying around our core focus to reinvent productivity and create a platform for a mobile-first and cloud-first world,” he said.

It recently emerged Microsoft plans to drop the Nokia brand just six months after acquiring Nokia’s phone business, demonstrating confidence in its own phone operations.

“Customers are embracing our latest technologies, from Surface Pro 3 and Office 365 to Azure and SQL Server,” said Microsoft chief operating officer Kevin Turner.

Although net income fell by 13% to $4.5bn, investors were encouraged by the fact revenues beat analysts’ expectations by $1.2bn, pushing the Microsoft share price up by 3% in after-hours trade.

Chief financial offer Amy Hood said Microsoft delivered a strong start to the year, with continued cloud momentum and meaningful progress across its device businesses.

“We will continue to invest in high-growth opportunities and drive efficiencies across the organisation to deliver long-term shareholder value,” she added.

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