Microsoft today posted flat revenue to $20.40 in Q3 FY 2014 and net income declined to $5.66 billion from $6.06 billion. Cloud was one of the growth drivers. Analysts say Nokia acquisition will impact its profitability.
Q3 FY 2014 was the first quarter for Microsoft under the new CEO Satya Nadella, who took over the new position in February.
“This quarter’s results demonstrate the strength of our business, as well as the opportunities we see in a mobile-first, cloud-first world. We are making good progress in our consumer services like Bing and Office 365 Home, and our commercial customers continue to embrace our cloud solutions. Both positions us well for long-term growth,” said Satya Nadella, chief executive officer at Microsoft.
Redmond, Wash.-based Microsoft said its Office 365 revenue grew over 100 percent, and commercial seats nearly doubled, demonstrating strong enterprise momentum for Microsoft’s cloud productivity solutions.
Market researcher Forrester estimates the public cloud market will increase to $191 billion by 2020, up from $58 billion in 2013.
Windows OEM revenue grew 4 percent, driven by strong 19 percent growth in Windows OEM Pro revenue.
Microsoft is pinning its hopes on Windows 8 and updates to its operating system, though consumers increasingly are buying tablets instead of PCs. Market researcher FBR expects PC shipments to dip 3 percent this year.
Microsoft added nearly 1 million Office 365 Home subscribers in three months. Office 365 Home user base reached 4.4 million subscribers.
Microsoft sold 2 million Xbox console units, including 1.2 million Xbox One consoles.
Microsoft tablet revenue from Surface devices rose over 50 percent to approximately $500 million. For comparison, Apple iPad income dipped 13 percent to $7.6 billion.
Bing U.S. search share increased to 18.6 percent and search advertising revenue grew 38 percent.
Commercial revenue rose 7 percent to $12.23 billion.
Azure revenue increased over 150 percent.
The company also benefited from the end of support for its 13-year-old operating system, Windows XP, on April 8.
Windows volume licensing revenue grew 11 percent, as business customers continue to make Windows their platform of choice.
Will Nokia impact Microsoft?
Microsoft said its devices and consumer revenue grew 12 percent to $8.3 billion in Q3 FY 2014.
Microsoft will close its $7.2 billion acquisition of smartphone maker Nokia on Friday.
The merger is likely to reverse slippage from Microsoft in the U.S. mobile market, where Windows-enabled smartphones are expected to nab 4.6 percent this year, down from 4.8 percent in 2013, said eMarketer.
Microsoft declined to account for it in its outlook. Analysts expect the smartphone business to hurt Microsoft’s profit. Nokia had said in January that its smartphone sales slumped 29 percent in the October-December quarter of 2013.