Microsoft has clocked a record net loss of $2.05 billion in the fourth quarter ended June 30 against a net income of $6.48 billion in the year-ago quarter.
Its Q4 revenue fell 5.14 percent to $22.18 billion from $23.38 billion.
The record net loss for Microsoft is due to the writing down of its Nokia phone business and poor demand for its Windows operating system.
The Redmond-based company, under CEO Satya Nadella, took a charge of $7.5 billion in the fourth quarter related to the restructuring of its Nokia handset business, which it bought last year to boost its smartphone and OS business. Microsoft also took a charge of $940 million related to job cuts announced this month and last year.
Sales of Windows to computer manufacturers to install on new PCs fell 22 percent in the quarter. The company is scheduled to roll out Windows 10 on July 29, a much-awaited launch after a poor response to Windows 8.
Sales of Windows to businesses fell 21 percent from the year-earlier quarter, when demand for the operating system had surged after Microsoft discontinued support for Windows XP.
Revenue from Microsoft’s commercial cloud business, which includes offerings such as Office 365 and Azure, rose 96 percent, excluding the impact of a strong dollar.
Microsoft said it added 3 million subscribers for Office 365 in the quarter, taking the total number of subscribers for the product to 15.2 million at the end of June.
Earlier, Microsoft announced that the company would cut 7,800 jobs, or nearly 7 percent of its workforce, mainly in the phone hardware business.
The strengthening of the U.S. dollar compared to foreign currencies had a significant impact on results in the quarter.
“Our approach to investing in areas where we have differentiation and opportunity is paying off with Surface, Xbox, Bing, Office 365, Azure and Dynamics CRM Online all growing by at least double-digits,” said Satya Nadella, chief executive officer at Microsoft.
Microsoft said Devices and Consumer revenue declined 13 percent to $8.7 billion.
Windows OEM revenue decreased 22 percent as revenue was impacted by PC market declines following the XP end-of-support refresh cycle.
Surface revenue grew 117 percent to $888 million, driven by Surface Pro 3 and launch of the Surface 3.
Total Xbox revenue grew 27 percent based on strong growth in consoles, Xbox Live transactions and first party games.
Search advertising revenue grew 21 percent with Bing U.S. market share at 20.3 percent, up 110 basis points over the prior year.
Office 365 Consumer subscribers increased to 15.2 million, with nearly 3 million subscribers added in the quarter.
Commercial revenue increased slightly to $13.5 billion.
Commercial cloud revenue grew 88 percent driven by Office 365, Azure and Dynamics CRM Online and is now on an annualized revenue run rate of over $8 billion.
Server products and services revenue grew 4 percent, with stable annuity performance offsetting declines in transactional revenue.
Dynamics revenue grew 6 percent, with the Dynamics CRM Online install base growing almost 2.5x
Office Commercial products and services revenue declined 4 percent, with continued transition to Office 365 and lower transactional revenue due to declining business PCs following the XP end-of-support refresh cycle.
Windows volume licensing revenue declined 8 percent, driven primarily by transactional revenue declining following the XP end-of-support refresh cycle with annuity growth on a constant currency basis.
Microsoft will expand its partners to sell Surface — from over 150 to more than 4,500 resellers globally.