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Microsoft’s Shares Soar Despite Lower Sales

January 28, 2016

Satya Nadella Launches Microsoft Build ConferenceSatya Nadella Launches Microsoft Build Conference

(Reuters) – Microsoft reported quarterly revenue and profit that beat analysts’ expectations, driven by aggressive cost cutting and growing demand for its cloud products and services.

Microsoft, under chief executive Satya Nadella, has been focusing on cloud services and mobile applications as growth slows in its traditional software business.

Microsoft’s shares (MSFT) were up 5.3%in after-hours trading on Thursday.

Revenue from the company’s increasingly important “Intelligent Cloud” business, which includes products such as Windows Server and platforms such as Azure, rose 5% to $6.3 billion.

Total revenue, however, fell 10.1% to $23.80 billion, squeezed by a strong dollar as well as a weak personal computer market that has reduced demand for Microsoft’s Windows operating system. On an adjusted basis, revenue fell to $25.69 billion.

Revenue in the business that includes Windows fell 5% to $12.7 billion.

Global PC shipments fell 10.6% in the December quarter from a year earlier, according to research firm IDC.

However, IDC said business should improve later this year as companies that had delayed replacing machines before upgrading to Windows 10 make the switch.

Microsoft generates more than half its revenue from outside the United States, so is susceptible to big shifts in exchange rates.

The average value of the dollar, as measured against a basket of major currencies, was 11.7% higher in the last quarter of 2015 compared with the same quarter of 2014.

The company’s net income fell to $5.00 billion, or 62 cents per share, in its second-quarter ended Dec. 31 from $5.86 billion, or 71 cents per share, a year earlier.

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Excluding items, the company earned 78 cents per share.

Analysts on average had expected a profit of 71 cents per share and revenue of $25.26 billion, according to Thomson Reuters I/B/E/S.