Cloud services and Office lead Microsoft to a healthy Q4


— 9:00 AM on January 27, 2017

Microsoft reported financial results for the fourth quarter of 2016 (the second quarter of its fiscal 2017) yesterday. The company earned $24.1 billion in revenue and made $6.2 billion in operating income on that take. During the quarter, Microsoft also completed its $26.2 billion acquisition of LinkedIn.

  Q2 FY 2017 Q2 FY 2016 Change
Revenue $24.1 billion $23.8 billion up 1%
Operating income $6.2 billion $6 billion up 3%
Net income $5.2 billion $5 billion up 4%

The More Personal Computing business, which encompasses Windows, search, devices, and gaming, brought in $11.8 billion for Microsoft, a decrease of 5% from this time last year. Windows OEM revenue increased 5% from this time last year, search revenue was up 11%, and gaming revenue fell 3%. The company says Xbox console sales fell, but Xbox software and services helped to dampen that drop.

Microsoft's devices business suffered, thanks to an 81% decrease in phone revenue year-on-year. That precipitous drop led to a 35% decline in devices revenue overall compared to this time last year. Surface sales fell by 2%, but the introduction of the Surface Pro 4 and Surface Book has led to higher gross margins as the company phases out the Surface 3.

The Intelligent Cloud business brought in $6.9 billion in revenue for Microsoft, up 8% year-on-year. Server products and cloud services sales were up 12% on the year, and Azure revenue nearly doubled with a 93% increase compared to the year-ago quarter. Microsoft says that utilization of its Azure compute services is more than double that of this time last year.

Finally, the Productivity and Business Processes division took in $7.4 billion, up 10% year-on-year. The commercial side of the Office business saw revenue increase by 5%, thanks in part to a 47% increase in Office 365 commercial sales. Meanwhile, the consumer Office business enjoyed a 22% increase in revenue. Dynamics revenue was up 7%. The LinkedIn business contributed $228 million in revenue to this segment, as well.

For the third quarter of its fiscal 2017, Microsoft expects Productivity and Business Processes revenue of $7.65 billion to $7.85 billion, Intelligent Cloud revenue of $6.45 to $6.65 billion, and More Personal Computing revenue of $9.05 to $9.35 billion.

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