Microsoft Paints An Overall Colorful Picture In Its Q3 Earnings

The tech giant, Microsoft (MSFT, Financial), reported its third quarter earnings of the fiscal year 2015 on April 23 and left analysts and investors spell-bound with the spectacular performance which beat the analysts’ estimates. The rise in top and bottom line of the company was driven by the growth in the focus segments- namely the hardware section and the cloud computing section of the technological giant. Let’s quickly take a peek into the major factors shared during the earnings conference by Microsoft’s management.

The quarter numbers said it all

Revenue for the quarter rose around 6.5% year-over-year to $21.73 billion. It is notable that the recent acquisition of the phone division of Nokia contributed $1.4 billion to the total revenue earned in the third quarter of the fiscal year. In the quarter, the phone sales drove the revenue up 8% in the devices and consumer segment for Microsoft. However, the phenomenal growth was witnessed in the commercial cloud services including Office 365, the Microsoft Azure platform and the Dynamics CRM which grew 106% during the quarter in terms of their revenue generation power.

Presently, the annualized revenue run rate of the commercial cloud stands at around $6.3 billion. Server products and services saw revenue climb 10% year-over-year during the quarter mainly due the 25% growth in the Microsoft SQL Server. However, the Office commercial products and services revenue dropped around 2%, partially due to the migration of the customers to Office 365. COO, Kevin Turner, commented – “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 programme for Windows 10…”

The online services division also showed encouraging signs of growth with the online search advertising revenue climbing 22% since Bing’s market share in the U.S. soared to 20% during the quarter. However, the hardware revenues declined 4% primarily due to decrease in Xbox-one sales. This decline in hardware sales was partially offset by the sale in tablets with surface revenue growing by 44% over the prior year to $713 million.

Sales for the quarter easily surpassed the Street expectations that were hooked to $21.12 billion even in the presence of currency exchange rate fluctuations and decrease in personal computing. Diluted earnings per share stood at $0.61 a share, almost $0.10 a share above the estimate by the analysts. However, taking into account the currency headwinds, the per share earnings dropped about 10% in the quarter, from that reported a year ago.

Parting word

Through the third quarter results, it was evident that the popularity of personal computing is waning, though the cloud segment seems to be in a booming phase for the tech honcho. Even analysts have given mixed ratings to Microsoft’s stock varying from ‘buy’ to ‘market perform’ in most of the cases. Moving ahead into the next quarter it remains to be seen if the cloud line of business is able to show continued growth, and if the tech honcho is able to meet the estimates for the full-fiscal year.