Microsoft has reported on Thursday, Jan. 26, an unexpected boost in revenue from Windows OS and cloud services during both the year 2016 and the December quarter.
Microsoft's Boost In Windows Revenue
According to Computerworld, Microsoft has reported that its Windows revenue for the December quarter was up 3 percent to around $5.1 billion. This represents approximately 43 percent of the company's total. However, Microsoft's revenue from More Personal Computing (MPC) group including the Surface hardware and Windows portfolio during the December quarter was down 5 percent.
This is the sixth year-over-year decline in the last seven earnings periods. It is also the third straight quarter of revenue dropping. But CEO Satya Nadella focused in a Thursday call with Wall Street on the positive aspect of experiencing a broad growth across Windows for the last quarter.
According to company's data, the bulk of OS income consisting of the part of Windows revenue generated by sales of licenses to device makers was up 5 percent. This is a significant increase from a 5 percent contraction of a year ago. It is also a notable improvement from the previous quarter when operating system sales were flat.
Microsoft's CFO Amy Hood explained the details of this OS revenue growth. According to her, the Microsoft OEM business grew 5 percent the last quarter due to license sales to original equipment manufacturers like Dell, Hewlett-Packard, Lenovo and others. The two main niches in total OEM sales, the consumer and pro increased by 5 percent and 6 percent, respectively. They declined by 3 percent and 6 percent in the year-ago quarter.
Hood also mentioned growth in the cloud-based and commercial components of Windows' revenue. These categories include corporate payments for a subscription to Windows 10 Enterprise and Software Assurance. The growth of the pro segment of OEM sales was due to enterprise demand for Windows 10 and improving commercial PC market.
Both Hood and Nadella pointed out growth in sales of premium PCs as one of the reasons for the increased Windows OEM revenue. The premium PCs are specialized and higher-priced systems. They are used for high-performance applications and require increased computer power.
Microsoft's Increase In Cloud Services Revenue
According to Forbes, Microsoft also reported a boost in cloud services revenue across the Intelligent Cloud and Productivity and Business Processes segments. The run rate of the annualized revenue of the Commercial Cloud exceeded $14 billion. By the fiscal year 2018, Microsoft is on course to achieve $20 billion annual run rate.
In order to cross-sell its cloud SaaS products, the company has been able to leverage the popularity of its enterprise offerings. Microsoft reported that its cloud services and Office commercial products revenue grew 5 percent. An increased adoption continue to be reported by Microsoft's Dynamic cloud, as company's clients continue to adopt the ERP and CRM services that deploy intelligent cloud and machine learning to extract insights from previously acquired data.
Cloud services and Dynamics products revenue grew 7 percent during the quarter, driven mostly by growth in the Dynamics online revenue. As it offers the backing of Microsoft's ecosystem of services and the benefit of cloud, it is expected that Dynamic ERP and CRM revenue will continue to grow.
