Microsoft has published its Q2 2014 earnings report, and the company has made $6.56 billion in net income on $24.52 billion in revenue. Revenue has increased by 14 percent from the same period last year, and net income increased by 2.8 percent.
For consumer-related revenues, all eyes are on four parts of Microsoft’s business: Windows, Office consumer subscriptions, Surface, and Xbox. A decline in PC sales continues to impact Windows, with OEM revenue for Windows declining by 3 percent this quarter. Nokia reported 8.2 million Lumia sales during its latest quarter earlier today, and Microsoft's numbers reflect an improvement on the Windows Phone side. Windows Phone revenue increased by 50 percent, with higher sales of licenses and what Microsoft calls an "increase in mobile phone patent licensing revenue." Microsoft's Office 365 Home Premium subscriber growth looks encouraging too. Subscribers doubled to 2 million in just six months previously, but Microsoft is revealing today that the figure has risen to 3.5 million subscribers in the latest quarter.
Stronger Surface and Xbox sales
On the hardware side, Microsoft launched its Xbox One console during the recent quarter, and it has sold 3.9 million units to retail channels, more than the 3 million figure Microsoft previously disclosed had been sold to customers. Microsoft also managed to sell 3.5 million Xbox 360 consoles during the latest quarter. Surface 2 and Surface Pro 2 also launched in Q2, but Microsoft still isn’t offering up any specific guidance on sales figures for its tablets other than that "units more than doubled sequentially with improved Surface RT sales." Instead, it notes that revenue for Q2 was $893 million. Microsoft previously revealed its total Surface revenue from the RT launch in October 2012 through to the end of its financial year in June 2013 was $853 million. This quarter's Surface revenue was higher than all of the revenue in 2013.
While the company didn’t provide exact revenue figures for Surface in the same quarter last year, the previous quarter amounted to $400 million. Surface revenue may have increased quarter-on-quarter to $893 million and year-over-year, but Microsoft also notes the Surface cost of revenue was $932 million in the latest quarter. In other words, Microsoft lost $39 million on Surface during its latest quarter.
Microsoft's commercial businesses are still growing strongly. The software maker notes that Office 365 seats and Azure customers both grew over 100 percent in the latest quarter. Overall, commercial licensing revenue was up 7 percent to $9.59 billion thanks primarily to server, Office, and CAL licenses.
Aaron Souppouris contributed to this report.