Microsoft's Q3 revenue up 6% to $23.56 bn on low tablet, laptop sales

Microsoft Corp on Thursday reported quarterly revenue that slightly missed Wall Street estimates as it suffered a sharp dip in sales of its Surface tablets and laptops.

Shares of the world's largest software company fell 1 per cent to $67.62 in trading after the bell.

Under Chief Executive Satya Nadella, who took the helm in 2014, Microsoft has sharpened its focus on the fast-growing cloud computing unit to counter a prolonged slowdown in the personal computer market, which has weighed on demand for its Windows software.

For the fiscal third quarter, ended March 31, overall revenue on an adjusted basis climbed 6 per cent to $23.56 billion, but missed analysts' average estimate of $23.62 billion.

 

Revenue from Microsoft's personal computing unit, its largest by revenue, fell 7.4 per cent to $8.84 billion, in the quarter. Analysts on average had expected revenue of $9.22 billion, according to research firm FactSet StreetAccount.

The business includes Windows software, Xbox gaming consoles, online search advertising and Surface personal computers.

Surface revenue plunged 26 per cent in the quarter to $831 million, down from $1.3 billion in the year-ago quarter.

Sales of high-end computers from other makers, along with the fact that many Surface products have been on the market for many months, hurt Surface sales, said Zack Moxcey, an investor relations director for Microsoft.

The lower-than-expected revenue in the personal computing division came amid an uptick in the PC market.

Worldwide PC shipments rose 0.6 per cent in the first quarter of 2017, seeing growth for the first time in five years, market research firm IDC said earlier this month. Microsoft's Windows OEM revenue, a measure of the company's licence revenue from computer makers such as Dell Technologies and HP Inc , rose 5 per cent. Dell, in particular, reported strong increases in computer sales driven by high-end laptops.

Cloud Soars

Revenue from the unit that Microsoft calls "Intelligent Cloud," which includes server products and the company's flagship cloud computing platform, Azure, jumped about 11 per cent to $6.76 billion in the quarter.

Azure revenue soared 93 per cent in the quarter. The service competes with Amazon.com Inc's Amazon Web Services, the market leader in cloud infrastructure, as well as offerings from Alphabet Inc's Google, IBM and Oracle Corp .

Microsoft also, for the first time, reported a revenue growth rate for Dynamics 365, its competitor to Salesforce.com Inc's online sales software. Revenue grew 82 per cent in constant currency, though the firm did not give an absolute dollar total.

The company's net income rose to $4.80 billion, or 61 cents per share, in the quarter, from $3.76 billion, or 47 cents per share, a year earlier.

Excluding one-time items, Microsoft earned 73 cents per share. Analysts on average had expected 70 cents per share, according to Thomson Reuters I/B/E/S.

Microsoft said LinkedIn, which it bought for about $26 billion, contributed $975 million in revenue in the quarter.

Microsoft's shares had risen 9.9 per cent this year through Thursday, eclipsing the 7 per cent gain in the broader S&P 500.