Microsoft cloud sales soar as Windows OEM revenues fall

Company announces results for second quarter ending December 31st 2014
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Microsoft has delivered a mixed Q2 2015 financial quarter for the three months ending December 31st 2014.

Overall revenues during the quarter rose eight per cent year-on-year to $26.47 billion, while operating profit dipped two per cent to $7.77 billion.

Microsoft spent $243 million on 'integration and restructuring expenses', relating to both Microsoft's restructuring plan announced in July 2014 and the ongoing integration of the Nokia Devices and Services business.

Perhaps most interesting is Microsoft's cloud business - commercial cloud revenue grew 114 per cent driven by Office 365, Azure and Dynamic CRM Online, and is now on an annualised revenue run rate of $5.5 billion.

This helped commercial revenue grow five per cent to $13.3 billion, despite Office commercial products and services revenue declining one per cent. Server products and services revenues rose nine per cent while Windows volume licensing revenues increased by three per cent.

However, both Windows OEM Pro revenue and non-Pro revenue declined 13 per cent respectively. Microsoft says this was due to "the business PC market and Pro mix returning to pre-Windows XP end of support levels and by new lower-priced licenses for devices sold to academic customers".

The news comes after Microsoft announced Windows 10 will be free for users of Windows 7, 8 and 8.1 within its first year from launch.

Devices and Consumer revenue grew 8 per cent to $12.9 billion, with Surface revenue up 24 per cent to $1.1 billion, driven by Surface Pro 3 and accessories.

Office 365 Home and Personal subscribers increased to over 9.2 million, up 30 per cent over the prior quarter, while Search advertising revenue rose 23 per cent. Bing's US market share now stands at 19.7 per cent.

Xbox console sales reached 6.6 million units, while phone hardware revenue hit $2.3 billion.

"Microsoft is continuing to transform, executing against our strategic priorities and extending our cloud leadership," said Satya Nadella, Microsoft CEO.

"We are taking bold steps forward across our business, and specifically with Windows 10, to deliver new experiences, new categories, and new opportunities to our customers."

COO Kevin Turner added: "We again saw enthusiasm and demand around our cloud offerings like Office 365, Dynamics CRM Online and Azure, as well as Surface Pro 3.

"Our sales engagement worldwide continues to focus on helping customers and partners transition to the cloud and navigate the shifting product mix related to our services and solutions."

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