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Microsoft's Q4 2014 earnings show improved revenue, decreasing profits

Microsoft's Q4 2014 earnings show improved revenue, decreasing profits


Microsoft's cloud is the silver lining

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Microsoft has published its Q4 2014 earnings report, and the company has made $4.6 billion in net income on $23.38 billion in revenue. Revenue has increased compared to $19.9 billion from the same period last year, and net income decreased only slightly compared to last year's $4.97 billion. In all, the earnings don't seem to hold many big surprises — at least not compared to the massive layoffs it recently announced.

Stronger-than-expected PC demand helped Intel’s latest quarterly earnings, and it has also impacted Microsoft’s. OEM revenue for Windows increased by 3 percent this quarter, further hinting that the decline of traditional PC sales might be starting to slow down. Some of that increase is likely thanks to businesses refreshing their PC hardware as Windows XP entered end of support back in April.

As Microsoft battles to focus its efforts on mobile and the cloud, it is still attempting to push the Windows Phone platform. The company reported selling 5.8 million Lumia phones and 30.3 million non-Lumia phones "following the completion of the NDS acquisition." Although that may look like a 21 percent drop for Lumia sales year over year, those sales numbers only account for two of the three months of this past quarter. Microsoft has now acquired Nokia’s phone business, and it plans to focus solely on Windows Phone for the low- and high-end over the next 18 months.

Unfortunately, details on Surface sales are a mystery. That’s no surprise as Microsoft still refuses to provide sales figures, but Surface accounted for $409 million in revenue this quarter. Microsoft's decision not to ship its Surface Mini hit revenue for Surface overall, as the company admits that current year cost of revenue related to Surface includes a "decision to not ship a new form factor." Elsewhere in hardware, Microsoft sold 1.1 million Xboxes during the quarter, though it did not specify how many were Xbox Ones and how many were Xbox 360s. Either way, the Xbox One has fallen behind Sony’s PlayStation 4 US sales for six months in a row.

Microsoft continues to do well with its server and cloud offerings, both of which are increasingly important businesses for the company. Revenue has increased 11 percent to $13.48 billion overall. That's a mix of its Azure cloud service, Office 365 for business and enterprise, Windows volume licenses, and products like Exchange, SharePoint, and Lync. With commercial cloud revenue growing by 147 percent, Microsoft's cloud performance is still the most impressive growth point for the software maker as it continues its focus on cloud and mobile. Even on the consumer side, Office 365 Home and Personal subscribers now total 5.6 million, that's an addition of 1 million subscribers this quarter.

Microsoft’s latest earnings come as its new CEO, Satya Nadella, attempts to steer the company in a new direction. 18,000 job cuts are planned over the next year, with most affecting former Nokia employees as part of the $7.2 billion acquisition. Nadella is planning to outline more of Microsoft’s plans during the company’s earnings call at 5:30PM ET, and we’ll update you accordingly with any key remarks.