Microsoft Q3 FY 2017 earnings: Cloud saves the day, but Windows smartphones to get the boot

Riding on its Cloud services, Microsoft has announced that its commercial Cloud annualised revenue run rate exceeded $15.2 billion in the third quarter of 2017.

Revenue in ‘Intelligent Cloud’ was $6.8 billion and increased 11 per cent. Server products and Cloud services revenue increased 15 per cent driven by Azure revenue growth of 93 per cent.

Enterprise Services revenue decreased one per cent with declines in custom support agreements offset by growth in premier support services and consulting.

“Our results this quarter reflect the trust customers are placing in the Microsoft Cloud. From large multi-nationals to small and medium businesses to non-profits all over the world, organisations are using Microsoft’s Cloud platforms to power their digital transformation,” Satya Nadella, Chief Executive Officer at Microsoft, said in statement on Thursday.

Revenue in personal computing was $8.8 billion and decreased seven per cent driven primarily by lower phone revenue. Windows OEM revenue increased five per cent.

While Windows commercial products and Cloud services revenue increased six per cent, Surface revenue decreased 26 per cent.

Microsoft returned $4.6 billion to shareholders in the form of share repurchases and dividends in the third quarter of fiscal year 2017.

“Strong execution and demand for our Cloud-based services drove our commercial Cloud annualised revenue run rate to more than $15.2 billion,” Amy Hood, Executive Vice President and Chief Financial Officer at Microsoft, added.

Revenue in productivity and business processes was $8 billion and increased 22 per cent. Dynamics products and Cloud services revenue increased 10 per cent driven by Dynamics 365 revenue growth of 81 per cent, the company said.

Indeed, it looks like this year could finally see the end of Microsoft’s smartphone ecosystem. Microsoft watcher Paul Thurrot put out a short explainer, detailing how Microsoft’s smartphone ecosystem may finally see its end by as soon as June.

In its earnings report Microsoft claimed that “Operating expenses declined 11 percent from lower Phone expense and Surface launch-related marketing spend in the prior year”, to which Thurrot explained that, Microsoft basially saved money by killing Windows Phone and not launching a Surface in the second quarter.

Microsoft’s wind-down of its phone business is “expected to be completed by the end of the current fiscal year.” That’s the end of June, BTW

— Paul Thurrott (@thurrott) April 27, 2017

“Two years ago, Microsoft announced that it was winding down its in-house Windows phone hardware business—e.g. what used to be Nokia—establishing a two-year plan in which it would reduce losses each quarter by making fewer and fewer of the unpopular and poorly-selling handsets. That two-year plan ends in the current quarter, but Microsoft basically hit its target in the previous quarter, noting that it “had no material Phone revenue” in the quarter. So, Mission Accomplished, I guess.” Paul Thurrot wrote on his website Petri.com.

The tech giant a couple of days ago started rolling out its Windows 10 Mobile Creators Update or Redstone 2. The rollout for the same began on 26 April, but sadly supported only a handful of smartphones.

With inputs from IANS

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