Microsoft profits slip but top forecasts

By Staff Writer

Feb 01, 2016 01:37 AM EST

On Thursday, Microsoft revealed its quarterly earnings that, surprisingly, exceeded all expectations. The fiscal second-quarter adjusted earnings per share, posted by the company, was 78 cents on a revenue of $25.69 billion. This topped analysts' expectations of 71 cents per share on $25.26 billion in revenue.

StreetWise Journal shows that shares had gone up by 8% in after-hours trading, but later lost some of its ground. NPD Group analyst Stephen Baker said, "People who think Microsoft is sliding into irrelevancy really need to re-evaluate how they see the company. They are a software-first company in a world that is increasingly about software."

The company shareholders have received $6.5 billion by way of share repurchases and dividends during the quarter ended in December 2015. Now, the investors are keenly eyeing Microsoft's reported deferred revenue of $25 billion that exceeds analyst expectation of $23 billion.

Currently, the company is focused on its cloud business that is showing great potential for future growth. It is at a crucial junction of shifting from its PC base to cloud platform, thus moving products like Azure and Office 365 into its commercial and enterprise business. "Businesses everywhere are using the Microsoft Cloud as their digital platform to drive their ambitious transformation agendas," Satya Nadella, Microsoft's CEO said in a statement, as per The Citizen. "Businesses are also piloting Windows 10, which will drive deployments beyond 200 million active devices."

However, the company's quarterly profits had slipped but still managed to show numbers exceeding the forecast. The earnings report showed doubled sales of Microsoft Azure, with 'Intelligent Cloud' showing a 5% increase, with a revenue of $6.3 billion, topping analyst expectations of $6.2 billion. "It's really about cloud at this point, it's the Rock of Gibraltar in terms of what Microsoft's seeing," said Daniel Ives, an analyst at FBR Capital Markets, according to CNBC. "Compare those to other tech dinosaurs - Oracle, HP - that they're competing against. ... They picked a right time to bet on cloud."

However, the company's 'More Personal Computing' revenue went down by 5% and stood at $12.7. The decrease was mainly recorded due to a decrease in phone and Windows revenue, which fell short of the 12.3 billion expectations. On the other hand, its surface devices saw a boost with a 30% increase in the sale of X-Box 360 mainly due to the holiday season.

The company unveiled the third-quarter roadmap where it expects its Productivity and Business Processes segment to earn $6.4-6.6 billion versus the $6.8 expectation. The Intelligent Cloud and More Personal Computing segments are expected to fetch around $6.1-$6.3 billion and $9.1-$9.4 billion in revenue, compared to the expectations of $6.3 billion and $9.3 billion respectively.

Earlier this month, Microsoft revealed its philanthropic arm when it announced it will make donations to 70,000 non-profit organizations and research companies in the next three years. The announcement came from Nadella at the World Economic Forum in Davos, Switzerland. Nadella, since taking over the reins, has sought to reinvigorate the world's leading, multi-billion dollar software company in more ways than one.

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