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Microsoft's cloud services boost revenue

By Catherine Knowles, Fri 24 Apr 2015
FYI, this story is more than a year old

Microsoft has experienced significant revenue growth for the year ended March 31, 2015, largely due to the success of its cloud services, namely Microsoft Azure, Office 365, Bing and Xbox Live.

The company’s revenue for the quarter ended March 31, 2015 grew to $21.7 billion. Gross margin, operating income, and diluted earnings per share (‘EPS’) for the quarter were $14.6 billion, $6.6 billion, and %0.61 per share, respectively.

Microsoft’s restructuring plan, which was announced in July 2014, as well as the ongoing integration of the Nokia Devices and Services business resulted in $190 million in expenses, or a $0.01 per share negative impact.

The company also revealed Windows revenue is significantly declining, with Windows OEM Pro revenue declining 19% and Windows OEM non-Pro revenue declining 26%.

"Customers continue to choose Microsoft to transform their business and as a result we saw incredible growth across our cloud services this quarter," says Satya Nadella, Microsoft chief executive officer.

"Next week at Build we're excited to share more about how we're empowering every individual and organisation on the planet to achieve more with the next generation of our platforms,” says Nadella.

“We executed with strong operational and financial discipline again this quarter, and are seeing positive impact from our investments in key growth areas,” says Amy Hood, Microsoft chief financial officer. 

“We remain focused on maximising shareholder value and again increased our overall return of capital to shareholders,” she says.

Devices and Consumer revenue grew 8% (up 11% in constant currency) to $9.0 billion, with the following business highlights:

  • Office 365 Consumer subscribers increased to over 12.4 million, up 35% sequentially
  • Windows OEM Pro revenue declined 19%, as Pro mix returned to pre-Windows XP end-of-support levels and the business PC market declined
  • Windows OEM non-Pro revenue declined 26%, and was said to be due to channel inventory drawdown and ongoing mix shift to opening price point devices
  • Search advertising revenue grew 21% (up 24% in constant currency), with Bing U.S. market share at 20.1%, up 150 basis points over prior year
  • Xbox Live usage grew over 30%, driven by increased users and deeper user engagement
  • Surface revenue of $713 million, up 44% (up 53% in constant currency) driven by Surface Pro 3
  • Phone hardware revenue of $1.4 billion, with 8.6 million Lumia units sold

Commercial revenue grew 5% (up 7% in constant currency) to $12.8 billion, with the following business highlights:

  • Commercial cloud revenue grew 106% (up 111% in constant currency) driven by Office 365, Azure and Dynamics CRM Online, and is now on an annualised revenue run rate of $6.3 billion
  • Server products and services revenue grew 12% (up 16% in constant currency), with premium versions of Windows Server, System Center Server and SQL Server together growing 25%
  • Office Commercial products and services revenue declined 2% (up 1% in constant currency); transactional revenue was impacted by the continued transition to Office 365 and declines in business PC sales following the XP refresh cycle
  • Windows volume licencing revenue declined 2% (up 1% in constant currency), with transactional revenue declining following the XP refresh cycle partially offset by annuity revenue growth

“We remain focused on strong execution from our sales teams. Around the world we're seeing high interest in deployment of our cloud and server products, as well as participation in the enterprise early adopter program for Windows 10,” says Kevin Turner, Microsoft chief operating officer.

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