Microsoft's Q2 2015 recap: $26.5 billion in revenue despite a drop in profits

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Microsoft's Q2 2015 recap: $26.5 billion in revenue despite a drop in profits

Microsoft has revealed their Q2 2015 earnings today, and the Redmond giant has earned $26.5 billion in revenue despite a drop in profits. Microsoft was able to snag $5.8 billion in net income.

Xbox platform revenue decreased 20 percent, which factored in the declining sales of the Xbox 360 (more people are opting for the Xbox One). Surface revenue was up by 24 percent thanks to the Surface Pro 3 and related accessories.

Windows Phone revenue actually declined 61 percent. According to Microsoft, this was “due primarily to prior year recognition of approximately $650 million from the Nokia commercial agreement which terminated upon the completion of the acquisition in Q4 FY14.” On the bright side, Microsoft saw 10.5 million Lumia units sold in the affordable smartphone market.

Windows OEM Pro revenue declined by 13 percent, while Office Consumer revenue declined by 25 percent.

Microsoft indicated that first-party games revenue was up by 79 percent, thanks to Minecraft (after the acquisition of Mojang), Halo The Master Chief Collection, and Forza Horizon 2. Xbox Live resale revenue was up 42 percent, driven by higher Xbox Live transactions.

Microsoft also revealed that Search advertising revenue was up 23 percent, while display advertising revenue declined. Office 365 subscribers reached an all-time high with over 9.2 million subscribers, an increase of 30 percent over the previous quarter.

Microsoft’s Devices and Consumer revenue grew by 8 percent to $12.9 billion, while commercial revenue grew 5 percent to $13.3 billion. Microsoft continues to prove that their server and cloud offerings are still strong, despite a decline in profit from Windows. Here is a breakdown by product and service:

  • Surface revenue of $1.1 billion, up 24%, driven by Surface Pro 3 and accessories
  • Office 365 Home and Personal subscribers increased to over 9.2 million, up 30% sequentially over prior quarter
  • Search advertising revenue grew 23%, with Bing U.S. market share at 19.7%, up 150 basis points over prior year
  • Xbox console sales totaled 6.6 million units, with strong holiday season performance
  • Phone Hardware revenue of $2.3 billion, with 10.5 million Lumia units sold driven by growth in affordable smartphones
  • Windows OEM Pro revenue declined 13%; revenue was impacted by the business PC market and Pro mix returning to pre-Windows XP end of support levels and by new lower-priced licenses for devices sold to academic customers
  • Windows OEM non-Pro revenue declined 13%, with license growth from opening price point devices
  • Commercial cloud revenue grew 114% driven by Office 365, Azure and Dynamic CRM Online, and is now on an annualized revenue run rate of $5.5 billion
  • Office Commercial products and services revenue declined 1%; transactional revenue was impacted by the continued transition to Office 365 and declines in commercial PCs following the XP refresh cycle
  • Server products and services revenue grew 9%, with double-digit growth of SQL Server and System Center
  • Windows volume licensing revenue increased by 3%, with annuity revenue growth partially offset by declining transactional revenue
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