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Microsoft Corporation Beats Earnings Estimates

Microsoft released the earnings results from its third fiscal quarter after closing bell tonight. The software and technology giant posted earnings of 62 cents per share on $21.73 billion in revenue.

Microsoft Corporation Beats Earnings Estimates

Analysts had been expecting Microsoft to report earnings of 51 cents per share on $21.14 billion in revenue. In the same quarter a year ago, the company reported earnings of 68 cents per share on $20.4 billion in revenue.

Key metrics from Microsoft’s earnings report

Microsoft’s reported earnings were 61 cents per share, including restructuring costs of 1 cent per share. The company noted a negative impact of 3 percentage points on revenue growth due to the strengthening of the U.S. dollar.

Gross margin was $14.6 billion, while operating income was $6.6 billion.

Microsoft’s earnings by segment

Microsoft reported a 5% increase in commercial revenue, which rose to $12.8 billion, higher than the consensus estimate of $12.42 billion. Commercial cloud revenue increased 106%, driven by Dynamics CRM Online, Azure, and Office 365, while Server products and services saw a 12% increase in revenue, driven by Windows Server, SQL Server and System Center Server. Office Commercial products and services revenue fell 2%.

Revenue from Devices and Consumers rose 8% to $9 billion. Microsoft reported more than 12.4 million Office 465 Consumer subscriptions. Windows Pro revenue fell 19%, while Widows non-Pro revenue fell 26% mostly due to channel inventory drawdown.

The Surface tablet line saw a 44% increase in revenue year over year to $713 million. The Surface Pro 3 drove that increase. Microsoft sold 8.6 million Lumia smartphones in the quarter, bringing in revenue of $1.4 billion, which is a 16% decline. Management said IP licensing revenue was down because of sales of devices with low royalties. However, the company did sell more smartphones. It also sold 24.7 million non-Lumia phones.

Microsoft reported a 30% increase in Xbox Live usage. Search ad revenue increased 21% due to higher search volume. The company reported a 20.1% share of the U.S. search market.

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