SAN FRANCISCO (AFP) – Microsoft on Monday reported that its quarterly profit dipped but revenue increased in a sign that it is adapting to lifestyles centered on mobile devices and cloud services.
Bright spots during the three-month period ending December 31 included rising sales of Microsoft devices such as Surface tablets, Lumia smartphones, and Xbox One video game consoles.
Meanwhile, money made from licensing Windows software to computer makers and businesses slipped as revenue from subscriptions in the cloud jumped.
“The overall goal of having more customers every quarter moving to the cloud is actually a structural guide post we have on a multi-year journey,” Microsoft chief financial officer Amy Hood said.
People and businesses renting Microsoft programs as online services instead of buying software outright means less money up front but the potential to make more profit over time through subscriptions and sales of premium features.
The US technology titan’s overall quarterly earnings were in line with expectations, but shares lost ground.
Microsoft shares were down slightly more than four per cent to $44.98 in after-market trading that followed release of the earnings figures.
Chief executive Satya Nadella touted the quarterly results as evidence Microsoft is on course in adapting to “cloud first, mobile first” lifestyles after building its empire on selling packaged software for computers.
“I am encouraged by the progress we are making in our transformation,” Nadella said during an earnings call.
Profit fell 10 per cent from a year ago to $5.9 billion while revenue hit $26.5 billion in the quarter ended on December 31.
Microsoft noted that earnings in Japan and China fell particularly short of expectations. Challenges in Japan centered on economic conditions there.
Microsoft said it was working through “a set of geo-political issues” in China but had pockets of growth in that country.
Microsoft executives forecast that this year it would see revenue declines in China, Japan, and Russia.
In the recently ended quarter, revenue from business cloud services including Office 365 and Azure more than doubled to hit an annualized rate of $5.5 billion.
Meanwhile, subscriptions to home versions of Office 365 and Personal climbed more than 30 per cent to 9.2 million.
“We again saw enthusiasm and demand around our cloud offerings,” said Microsoft chief operating officer Kevin Turner.