Microsoft revenue drops 6%, profit dips 25% in Q3

Microsoft CEO Satya Nadella
Microsoft today said its revenue dipped 6 percent to $20,531 million, while net income nosedived 25 percent to $3,756 million in the third quarter of fiscal 2016.

The software major generated $6.5 billion (+1 percent) from Productivity and Business Processes, $6.1 billion (+3 percent) from Intelligent Cloud and $9.5 percent (+1 percent) from Personal Computing during the third quarter ended March 31, 2016.

Microsoft made an investment of $2.3 billion in Q3 towards commercial Cloud business.

The decline in quarterly revenue and profit comes as the Redmond, Wash.-based software giant continues to transform itself from a license-fee-focused enterprise tied to personal computers to a major player in cloud services and emerging technologies. Microsoft could not make money after buying Nokia’s phone business as well.

Declining PC sales were a major reason why chipset maker Intel is cutting 12,000 jobs or 11 percent of its total workforce globally. IBM clocked its 16th straight quarter of declining sales.

“Organizations using digital technology to transform and drive new growth increasingly choose Microsoft as a partner,” said Satya Nadella, chief executive officer at Microsoft. “As these organizations turn to us, we’re seeing momentum across Microsoft’s cloud services and with Windows 10.”

Productivity and Business Processes division

Office commercial products and cloud services revenue grew 7 percent driven by Office 365 revenue growth of 63 percent.

Office consumer products and cloud services revenue grew 6 percent with Office 365 consumer subscribers increasing to 22.2 million.

Dynamics products and cloud services revenue grew 9 percent with Dynamics CRM Online seat adds more than doubling.

Intelligent Cloud division

Server products and cloud services revenue increased 5 percent driven by double-digit annuity revenue growth.

Azure revenue grew 120 percent with usage of Azure compute and Azure SQL database more than doubling.

Enterprise Mobility customers more than doubled to over 27,000, and the installed base grew nearly 4x.

Personal Computing division

Windows OEM revenue declined 2 percent, outperforming the PC market, driven by higher consumer premium device mix.

Surface revenue increased 61 percent driven by Surface Pro 4 and Surface Book.

Phone revenue declined 46 percent.

Xbox Live monthly active users grew 26 percent to 46 million.

Search advertising revenue excluding traffic acquisition costs grew 18 percent with continued benefit from Windows 10 usage.