LIVE: Microsoft Beats, But Windows Had A Bad Quarter And The Stock Is Dropping

Microsoft earnings are out.

  • Revenue: $US26.5 billion versus $US26.33 billion expected by analysts. That’s up 8% from last year.
  • GAAP EPS: $US0.71 versus $US0.71 EPS expected, which is down 9% from a year ago.

It’s still early, but the stock is down 2% on a weak performance by Windows.

It was a hard quarter for Windows, as OEM revenue — the amount of money Microsoft got from selling Windows on new PCs, as opposed to corporations — was down 13% from last year.

Microsoft told us that last year was boosted by the impending end of Windows XP support for enterprises; that boost doesn’t exist this year, so it was hard to keep growth up.

In the release, Microsoft also says its EPS includes a $US0.02 restructuring chage related to Nokia, so Microsoft would argue it beat expectations on the bottom line, as well as the top line.

Some other data points of interest: Microsoft generated $US2.3 billion in revenue off 10 million phone sales, which is a $US230 average selling price. Apple’s average selling price for an iPhone is north of $US600, for context.

Microsoft says the Surface generated $US1.1 billion in revenue, and was profitable with a “respectable” gross margin, versus “just squeak[ing] over the line” into profitability last quarter. Microsoft confirmed that it’s only selling the Surface Pro 3, and is no longer manufacturing the cheaper Surface 2.

Microsoft also told us that Office 365 is going like gangbusters, and was the main contributor to the company’s cloud business, which grew 114% from a year ago. Microsoft says the cloud business now has an annualized run rate of $US5.5 billion — up from $US4.4 billion in June — and that the home version of Office 365 now has 9.2 million subscribers, up from 7 million a quarter ago.

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