Microsoft released the earnings results from its third fiscal quarter after closing bell tonight. The software and technology giant posted earnings of 62 cents per share on $21.73 billion in revenue.
Analysts had been expecting Microsoft to report earnings of 51 cents per share on $21.14 billion in revenue. In the same quarter a year ago, the company reported earnings of 68 cents per share on $20.4 billion in revenue.
Key metrics from Microsoft’s earnings report
Microsoft’s reported earnings were 61 cents per share, including restructuring costs of 1 cent per share. The company noted a negative impact of 3 percentage points on revenue growth due to the strengthening of the U.S. dollar.
Gross margin was $14.6 billion, while operating income was $6.6 billion.
Microsoft’s earnings by segment
Microsoft reported a 5% increase in commercial revenue, which rose to $12.8 billion, higher than the consensus estimate of $12.42 billion. Commercial cloud revenue increased 106%, driven by Dynamics CRM Online, Azure, and Office 365, while Server products and services saw a 12% increase in revenue, driven by Windows Server, SQL Server and System Center Server. Office Commercial products and services revenue fell 2%.
Revenue from Devices and Consumers rose 8% to $9 billion. Microsoft reported more than 12.4 million Office 465 Consumer subscriptions. Windows Pro revenue fell 19%, while Widows non-Pro revenue fell 26% mostly due to channel inventory drawdown.
The Surface tablet line saw a 44% increase in revenue year over year to $713 million. The Surface Pro 3 drove that increase. Microsoft sold 8.6 million Lumia smartphones in the quarter, bringing in revenue of $1.4 billion, which is a 16% decline. Management said IP licensing revenue was down because of sales of devices with low royalties. However, the company did sell more smartphones. It also sold 24.7 million non-Lumia phones.
Microsoft reported a 30% increase in Xbox Live usage. Search ad revenue increased 21% due to higher search volume. The company reported a 20.1% share of the U.S. search market.
