Microsoft's profit drops 25%

Apr 21, 2016, 7:20 PM EDT
(Source: Mike Mozart/flickr)
(Source: Mike Mozart/flickr)

Microsoft's profit dropped 25%

The Wall Street Journal reports:

Microsoft Corp. said its earnings declined 25% in the third quarter, as the company reported lower operating profits across several of its business lines. Shares fell 4.1% to $53.46 in recent after-hours trading as per-share earnings and revenue missed expectations. The Redmond, Wash., software giant’s Intelligent Cloud segment, which includes its Azure on-demand computing services, posted a revenue increase of 3.3% to $6.1 billion. But the segment’s operating profit declined 14% to $2.19 billion. The Productivity and Business Processes segment, which includes Microsoft’s Office franchise, sales rose 1% to $6.52 billion—but profit declined 6.6%. Revenue from the More Personal Computing segment, which includes the flagship operating system Windows, edged up 0.9% to $9.46 billion, while operating profit for the segment jumped 57%.

Reuters notes:

Continued weakness in the personal computing market hobbled demand for one-time licenses for some of its products, the company said. "We would have liked to have seen 7 to 9 percent growth," Dan Morgan, a portfolio manager at Synovus Trust who holds Microsoft shares, said of intelligent cloud revenue. "We're trying to validate this story that Microsoft is truly becoming a cloud company, and they're not going to be relying on the desktop computer." Revenue at the Redmond, Wash.-based software giant fell to $20.53 billion from $21.73 billion. The company's net income in the third quarter ended March 31 fell to $3.76 billion, or 47 cents per share, from $4.99 billion, or 61 cents per share, a year earlier. The company blamed a higher than expected tax rate for part of the lower net income.

CNBC writes:

However, its cloud business grew more than expected last quarter. "Organizations using digital technology to transform and drive new growth increasingly choose Microsoft as a partner," Satya Nadella, chief executive officer at Microsoft, said in a release. "As these organizations turn to us, we're seeing momentum across Microsoft's cloud services and with Windows 10." Microsoft said its Intelligent Cloud business grew 8 percent in constant currency last quarter to $6.1 billion. Analysts expected the firm to report $6.28 billion in revenue from that segment, according to StreetAccount. Within the segment, Azure revenue grew by 120 percent.