Windows phone revenues decline 46%, dragging down Microsoft’s overall devices business

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Microsoft has been breaking its devices business out into the More Personal Computing segment for a few quarters now. And once again, the picture is generally good with only one product line–phones–dragging down the division’s overall performance in FY16 Q3.

Specifically, once again, Surface revenues were outstanding, and Xbox did well as well. Windows OEM revenues dropped, which shouldn’t be surprising given that PC sales, in general, have been down. But Windows Phone and Windows 10 Mobile were terribly negative contributors to revenue (not at all surprisingly):

Revenue in More Personal Computing grew 1% (up 3% in constant currency) to $9.5 billion, with the following business highlights:

  • Windows OEM revenue declined 2% in constant currency, outperforming the PC market, driven by higher consumer premium device mix
  • Surface revenue increased 61% in constant currency driven by Surface Pro 4 and Surface Book
  • Phone revenue declined 46% in constant currency
  • Xbox Live monthly active users grew 26% year-over-year to 46 million
  • Search advertising revenue excluding traffic acquisition costs grew 18% in constant currency with continued benefit from Windows 10 usage

While I’m sure we’re all disappointed that Windows phones aren’t doing well, the 61% increase in Surface revenues means that business isn’t going away anytime soon. And we’re all looking forward to the introduction of a Surface Phone, which should benefit greatly from the tremendous success of these sibling devices.

Stay tuned for more on Microsoft’s FY16 Q3 financials.

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