Yesterday Microsoft released the financial results from their 3rd Quarter of Fiscal Year 15, which ran from January to March 2015, and those results have obviously made Wall Street very happy as the company’s stock is up over 7% during trading today.
I wanted to highlight some of the key stats from those results that shows the growth the company continues to see as it has shifted their business focus to devices and services. All of the percentages are compared to the same period last year unless otherwise stated.
- $21,729 million in revenue (6% increase)
- $6,594 million in operating income (5% increase)
Devices and Consumer
- 8% increase to $9.0 billion
- Office 365 Consumer subscriptions now at over 12.4 million (35% increase from last quarter)
- Windows OEM Pro revenue was down 19% due to business PC market decline and end of XP support ending.
- Windows OEM non-Pro declined 26% due to reduced inventory levels and shift to no cost licenses for smaller Windows devices.
- Search share for Bing was at 20.1% - a new high.
- Xbox Live use increased over 30% due to more users and more in depth use of the service.
- Surface revenue was $713 million up 44%
- Phone revenue was $1.4 billion and more than 8.6 million Lumias were sold
Observations
During Satay Nadella’s remarks on this call he mentioned that Office 365 Consumer was adding an average of 1 million new customers every month and that there has been over 100 million downloads of Office on iOS and Android devices. Pretty amazing customer growth stats considering many thought the idea of subscription based Office was a non-starter.
The decrease in non-Pro OEM Windows is likely tied to more small screened devices hitting the market, those less than 10 inches in size, that get free Windows licenses for the manufacturer.
Microsoft’s Surface business only had revenue of $713 billion this past quarter after hitting over $1 billion dollars in revenue during Qtr 2 of FY15 (Oct-Dec 2014). Not shabby at all for a business that took a $1 billion dollar write down a couple of years ago. With the likelihood of a new Surface Pro device getting announced this summer the slow down makes sense. Surface 3 hits the market next month and will likely have a significant impact on that bottom line in Qtr 4 of FY15.
Microsoft’s phone business was down this quarter compared to last. In Qtr 2 phone hardware revenue was $2.3 billion with 10.5 million devices sold compared to just $1.4 billion in revenue and 8.6 million phones sold this past quarter.
Nadella made an interesting comment during the earnings call about the phone business:
We continue to demonstrate momentum in the value smart phone segment of the phone market, driving 18 percent growth in Lumia volume this quarter. However, we need to take further action to reduce our costs across devices as we execute on our Windows 10 first party hardware plans.
Growth in the low end Lumias makes sense as it is the only type of device that has really been introduced into the marketplace by Microsoft. The comment about needing to reduce cost across devices, while ambiguous at best, concerns me because we are well over a year since the last real flagship Lumia phones came out. The platform needs a new king of the hill and I hope cost reductions do not translate to letting a device like the 640XL become that high end leader.
Several times during the call Nadella also referred to BUILD 2015 and the new information that will be shared about the companies continued push forward with its devices and services.
I am looking forward to hearing it first hand in San Francisco next week so be sure to follow along with all the folks from the SuperSite for Windows and Windows IT Pro who will be there covering it for you.
