Microsoft has announced its latest financials, and I have made a quick table summarising the year-on-year comparison for the quarter. See the end of this post for what the confusing segment categories represent.
Quarter ending June 30th 2016 vs quarter ending June 30th 2015, $millions
|Productivity and Business Processes||6969||+308||3000||-167|
|More Personal Computing||8897||-346||964||+359|
|Corporate and Other||-1963||-1943||-3074||+5384|
A few observations.
Office 365 is Microsoft’s current big success. According to the company’s press release, Office 365 revenue grew 54%, which is huge. However, on-premise sales declined which meant that overall revenue growth in “Office commercial products and cloud services” was only 5%. Still, that’s a successful transition.
The picture was similar in consumer Office, with Office 365 consumer increasing by 23.1% while overall revenue grew by only 19%.
Dynamics CRM is moving to the cloud. Microsoft says that Dynamics CRM online grew by more than 2.5 times, while overall revenue grew only 6%. The maths may be deceptive, if CRM online grew from a small base, but it is a clear trend. Not to be confused with Dynamics 365, which is ERP/Business process management, though Nadella is also bullish on the latter.
Azure revenue grew 102%. Microsoft’s cloud results are not quite as sparkling as those from Amazon Web Services, but still impressive.
Enterprise Mobility is growing. This is a suite of tools built around InTune, Microsoft’s Mobile Device Management solution.
Surface is doing OK. Revenue up 9% thanks to Surface Pro 4 and Surface Book.
Windows news is mixed. “Windows OEM non-Pro revenue grew 27% and OEM Pro 2%” says the release, which given the weak PC market is decent. Windows 10 is at 350 million active devices, which Nadella said in the earnings webcast is the fastest ever adoption rate for a new version Windows; hardly surprising given the free upgrade offer and high-pressure upgrade marketing.
Xbox news is mixed. Gaming revenue is down 9%. Xbox Live revenue grew 4% but Xbox console revenue is down.
Windows Phone dives towards oblivion. Revenue is down 71%, from a base that was already tiny.
Microsoft cares less and less about consumers. “We will deliver more value and innovation” in Windows, says Nadella, “particularly for enterprise customers.” I also note the remark in the press release that “Search advertising revenue excluding traffic acquisition costs grew 16% (up 17% in constant currency) with continued benefit from Windows 10 usage,” suggesting that part of the Windows 10 consumer strategy is to use it as a vehicle for advertising; this is known in the business as “adware” and does not encourage me; it will push canny users towards Mac or Linux. In the earnings call, Nadella said that 40% of search advertising revenue is from Windows 10 devices. “The Cortana search box has over 100 million monthly active users with 8 billion questions asked to date,” said Nadella.
A reminder of Microsoft’s segments:
Productivity and Business Processes: Office, both commercial and consumer, including retail sales, volume licenses, Office 365, Exchange, SharePoint, Skype for Business, Skype consumer, OneDrive, Outlook.com. Microsoft Dynamics including Dynamics CRM, Dynamics ERP, both online and on-premises sales.
Intelligent Cloud: Server products not mentioned above, including Windows server, SQL Server, Visual Studio, System Center, as well as Microsoft Azure.
More Personal Computing: What a daft name, more than what? Still, this includes Windows in all its non-server forms, Windows Phone both hardware and licenses, Surface hardware, gaming including Xbox, Xbox Live, and search advertising.
- Microsoft financials April-June 2015: loss from Nokia write-down, comments on future direction
- Microsoft financials: record revenue, consumer sales declining in drift towards Enterprise
- Keeping track of Microsoft financials
- Microsoft financials: strong quarter especially in cloud services. We have a very different way to think about Windows says Nadella
- Microsoft’s story continues: Windows down, cloud up in financials Oct-Dec 2015