Microsoft today reported its earnings for the third quarter of its fiscal 2015, including revenue of $21.73 billion (up 6 percent) and earnings per share of $0.61. Analysts had expected the company to earn $21.06 billion in revenue and earnings per share of $0.51.
Microsoft’s stock was up less than 1 percent in regular trading. In after-hours, however, the company is up another 3 percent.
Office 365 had a particularly great quarter, adding 3.2 million subscribers (35 percent growth quarter-over-quarter) to hit 12.4 million. In Q2, the company had 9.2 million Office 365 subscribers, meaning in Q3 the business broke the 10 million mark for the first time.
Rumors of phenomenal Office 365 growth have abounded in recent months, and the numbers are now here to prove it. It’s certainly an impressive achievement: The company is slowly but surely converting its traditionally most lucrative software business into a subscription revenue stream.
Yet it still has a long way to go. Office Commercial products and services revenue still declined 2 percent. Microsoft explained that transactional revenue “was impacted by the continued transition to Office 365 and declines in business PC sales following the XP refresh cycle.”
Windows OEM revenue declined 19 percent in the “Pro” market, also because last year there was a bump thanks to Windows XP’s end-of-support, while “non-Pro” revenue declined 26 percent, “primarily due to channel inventory drawdown and ongoing mix shift to opening price point devices,” the company said.
In short, declines that Microsoft sees can usually be attributed to a still declining PC market. The exception is of course the company’s own computer lineup.
Microsoft revealed Surface revenue of $713 million, up 44 percent, driven mainly by Surface Pro 3 and its accessories. The newly announced Surface 3 doesn’t ship until May 5, so it won’t be impacting results for at least a quarter or two.
Last quarter, Surface generated a record $1.1 billion for Microsoft. While the company didn’t manage to get another $1 billion quarter from this business, the figure was still up compared to Q3 2014, when Surface generated approximately $500 million for the company.
Microsoft also disclosed phone hardware revenue of $1.4 billion, thanks to 8.6 million Lumia units sold in the quarter. The company’s record was set last quarter at 10.5 million Lumias sold.
All in all, Microsoft had a solid Q3 2015. Analysts were expecting a lot worse, but the company managed to pull off a win.
Not bad given that this quarter, Microsoft turned 40 years old.