Microsoft's $20.5 billion quarter: Surface up, Windows Phone down again

Microsoft announced its earnings for the third fiscal quarter of 2016, in which it reported $20.5 billion in revenue and $3.8 billion in net income (profit). The company reported huge growth for its Surface, Office businesses and Azure, but phone revenues and Windows OEM revenue declined.

Surface revenues were up again, which is $1.1 billion for the quarter, up 61 percent from the same quarter last year. The sales were driven by Surface Pro 4 and Surface Book. Overall the More Personal Computing division had $9.5 billion in revenue, which is up 1 percent. Xbox Live monthly active users also grew 26 percent YoY to 46 million users.

Phone revenues continued to decline, which is down 46 percent YoY. Microsoft managed to sell only 2.3 million Lumia phone in the quarter, a massive 73 percent drop, compared to 8.6 million in the same period last year. Microsoft also revealed it had sold 15.7 million other phones (likely feature phones) during the same period.

Windows OEM revenue decline 2 percent, but outperformed the PC market driven by higher consumer premium device mix.

Office consumer products and cloud services revenue grew six percent as Office 365 consumer subscribers increased to 22.2 million. Office commercial products and cloud services revenue grew 7 percent, driven by 63 percent Office 365 revenue growth.

Azure revenue grew 120% with usage of Azure compute and Azure SQL database more than doubling year-over-year. Search advertising revenue also grew 18 percent which benefited from the use of Windows 10.

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