Microsoft Revenue Driven by Surface and Azure - The UpStream

Microsoft Revenue Driven by Surface and Azure

posted Sunday Jan 31, 2016 by Scott Ertz

Microsoft Revenue Driven by Surface and Azure

Over the past few years, a lot has been written about Microsoft's financial standing. Some organizations, mostly tech blogs with financial interests in Google or Apple, have said that Microsoft is old tech and is over. Others, though, especially organizations that specialize in business and investing, have said that Microsoft is about to retake the crown as kind of the tech industry.

In the midst of tech blogs announcing that Microsoft's mobile ambitions have failed, Microsoft has announced their Fiscal Year 2016 Quarter 2 (3 months ending December 31, 2015) revenue. Revenue is down slightly, but not in any percentage that matters, especially considering Microsoft didn't release a new phone until the very end of the quarter. Windows OEM revenue is pretty flat, Search Advertising and Xbox Live are growing. Those aren't the places that matter, though.

In this quarter, the Surface brand drove $1.35 billion in revenue, up from $672 million for the previous quarter, and $1.1 billion this quarter last year. That seems to indicate that Microsoft's mobile ambitions are playing out very well, not failing in the way some sites might have you believe. This is "driven by the launch of Surface Pro 4 and Surface Book," which was a big change in the way Surface was designed, marketed and sold. It seems that the revised strategy after the merging of Lumia and Surface has been a success.

Another division driving growth for the company is their cloud strategy. Investment site The Motley Fool has said Microsoft rules the cloud, which is a pretty accurate assessment. While companies like IBM may have some specialized APIs for things like image detection and facial recognition, Microsoft's Azure service offers developers and virtual IT managers the biggest selection of options and most robust platform available, and everyone seems to be flocking to it.

With revenue of $6.3 billion for its cloud services, it represents a 5% growth for the division. The growth is led by Azure and Office 365, which now has almost 21 million subscribers, up more than double in the past 12 months. These businesses are the biggest business shift for the company, no longer relying of the success of any Windows platform, but instead spreading the love across all platforms, meaning that even if Windows 10 had been a sales problem, which it has not, the company has a backbone to stay strong.

Microsoft's stock price rose 5% despite its declining revenue.

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