Microsoft has released its earnings report for the second quarter of its 2016 financial year, posting non-GAAP revenue of $25.7 billion for the quarter ended Dec. 31, 2015 for an adjusted profit per share of 78 cents.
The figures beat Wall Street analyst expectations of revenue of $25.26 billion and earnings per share of 71 cents, while also improving upon the results of the corresponding quarter last year of $26.5 billion in revenue and earnings per share of 71 cents.
Right after Microsoft reported its better-than-expected performance for the previous quarter, its stock price jumped by more than 7 percent.
"It shows that momentum is building for Microsoft in 2016 rather than slowing, and that's different from what we're hearing from other enterprise tech companies," said FBR Capital Markets analyst Daniel Ives.
Microsoft broke down its results into three business units of Productivity and Business Processes, More Personal computing, and Intelligent Cloud.
Productivity and Business Processes, which includes Office and Dynamics, made $6.7 billion for the quarter compared to $6.3 billion in the previous quarter.
More Personal Computing, which includes Windows, Devices, Search and Gaming, made $12.7 billion, up from $9.4 billion in the previous quarter. The massive increase was due to the better sales performance of the Surface line of Microsoft, which returned $1.35 billion in revenue to the company in the last quarter for an improvement of 29 percent.
Intelligent Cloud, which includes Enterprise Services and service revenue, made $6.4 billion compared to $5.9 billion in the previous quarter. Microsoft stressed that the performance of this business unit was one of the integral factors in the company's strong performance for the last quarter, as revenue from server products grew 10 percent while revenue from Azure grew a whopping 140 percent. The company also noted that over a third of the companies in the Fortune 500 have tapped Microsoft's Enterprise Mobility solutions, which is an improvement of almost three times compared to the previous year's corresponding quarter.
By the estimates of most analysts, Microsoft comes in second place for the most prominent segment of the market for cloud services, wherein storage and other service are being rented out to clients from data centers, behind Amazon. In third and fourth places are IBM and Google.
"Businesses everywhere are using the Microsoft Cloud as their digital platform to drive their ambitious transformation agendas," said Microsoft CEO Satya Nadella in a statement, adding that enterprises are also moving into Windows 10, which will push deployments of the operating system to over 200 million active devices.
One thing to note about Microsoft's earnings report is the decline of its smartphone business, with revenue falling by 49 percent. The company said that figures are expected, as Microsoft implemented a strategy change in July of last year that included decreasing the number of smartphones that Microsoft will look to sell.
There are rumors that Microsoft will soon be releasing the Surface Phone, as the company was found to own the surfacephone.com URL, and accessing it leads to Microsoft's official website for the Surface line. Releasing such a device could prove to be a huge boost to the company's smartphone business as it would combine it with its successful Surface business.
However, whether that happens or not, Microsoft's cloud business is looking like it will be the unit that will play the biggest part in propelling the company forward into the future.
