Cloud services and servers drive a strong Q3 for Microsoft

Microsoft's Q3 results are in. The company made $5.8 billion in operating income on $20.4 billion in revenue. Operating income was flat versus a year ago, while revenue decreased 12%. The company blames that decline in part on a 17% revenue decline in its More Personal Computing segment, which includes Windows and Windows Phone operations. Another reason for the overall revenue decline is a $1.3 billion deferral for Windows 10.

  Q3 2015 Q3 2014 Change
Revenue $20.4 billion $23.2 billion down 12%
Operating income $5.8 billion $5.8 billion --
Net income $4.6 billion $4.5 billion up 2%
Earnings per share $0.57 $0.54 up 6%

Despite that 17% decline, Microsoft took in $9.3 billion in revenue from its personal computing business. The slump is due in part to a precipitous 54% year-over-year drop in Windows Phone revenue. Microsoft says Windows OEM revenue only declined 6%, however, a result that it claims is outperforming the PC market as a whole. The company also says the arrival of Windows 10 is pushing buyers toward more premium devices. Xbox Live's monthly active user base also grew 28% to 39 million. The Surface didn't have a good quarter, though, according to Paul Thurrott's live-tweeting of the company's conference call:

The sun was brighter for the Intelligent Cloud segment, which includes the company's server products and services like Windows Azure. Microsoft said revenues increased 8% year-over-year (or 14% in constant currency—a way of reporting revenue independent of exchange rate fluctuations) to $5.9 billion, thanks in part to a doubling of revenue and compute usage for Azure. Server products and cloud services revenue grew 13%.

The Productivity and Business segment took in $6.3 billion, a 3% decline year-on-year (but a 4% increase in constant currency terms). The company cited strong revenue growth of 70% for Office 365 among commercial users as a bright spot. Office 365 consumer subscribers also grew to 18.2 million, 3 million of which were added in the past quarter. Microsoft's Dynamics CRM revenue grew 12% in constant currency, and the company says it tripled its Dynamics online subscriber base at large businesses year-on-year.

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