Microsoft blames slow Surface sales for revenue miss


This is the first quarter that Microsoft is counting LinkedIn's contributions to its results, and the social network was responsible for $975 million of revenue.

The company's net income rose to $4.80 billion, or 61 cents per share, in the third quarter ended March 31, from $3.76 billion, or 47 cents per share, a year earlier.

Microsoft was expected to report $23.62 billion in revenue by the Wall Street, so Redmond slightly missed out on analysts' expectations. Hershey is adding Azure to a cloud computing strategy that also includes Amazon Web Services, using Microsoft's machine-learning technology to analyze data captured by sensors. Office commercial products and cloud services revenue increased 7%, while Office consumer products and cloud services revenue increased 15%.

"Our results this quarter reflect the trust customers are placing in the Microsoft Cloud", said CEO Satya Nadella.

Matched revenue estimates. The company saw non-GAAP revenue figures of $23.557 billion, basically matching our consensus estimate of $23.551 billion.

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As always, Microsoft's cloud and Office products have helped push revenues and profits.

However, after falling by 2% last quarter, Surface revenue dropped by a massive 26% (25% CC), which Microsoft attributed to "increased price competition in the premium 2-in-1 category and product end-of-lifecycle dynamics". Microsoft expects its cloud-computing business to hit a $20 billion run rate by 2018.

Intelligent cloud revenue was $6.8 billion, up 11 percent from a year ago. Microsoft now has 26.2 million Office 365 consumer subscribers.

Microsoft said it was encouraged by sales of devices from other manufacturers - revenue from sales of Windows to other manufacturers was up 5% in constant currency, ahead of the overall PC market. Other areas like Windows OEM revenue, gaming revenue and even search revenue were up by between 4 and 8 percent. This was the first full quarter in which LinkedIn was part of Microsoft, and it drove $965 million in operating expenses, including $153 million in amortization of intangibles - a term that usually covers things like goodwill, trademarks, or brand value.