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Microsoft FQ2 Earnings Report: FQ2 Revenue Hits $26.5 Billion Mark, Profit Drops

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Microsoft has released its earnings report for the second quarter of its financial year 2015, representing the three months ended Dec. 31, 2014.

The report revealed that the company's sales increased by 8 percent compared to the second quarter of the previous financial year, at $26.47 billion.

However, while Microsoft posted higher sales, the company was not able to translate the higher figures to better revenues as profits decreased from $6.56 billion, or 78 cents per share that was posted in the year-ago period to only $5.86 billion or 71 cents per share for the recently concluded quarter.

The decrease in quarterly profit was in line with forecasts by analysts, as the sluggish sales of personal computers likewise dampened the demand for the company's Windows software. In addition, Microsoft struggled with the effects of a strong United States dollar.

Windows, Microsoft's flagship business, has been under steady pressure for a period of three years due to declining sales of personal computers. However, it seems that the market is stabilizing over the recent months.

Currency shifts that affect the United States dollar, in addition, negatively affected Microsoft's profits, though the company did not reveal exactly by how much. Microsoft makes almost three-quarters of the company's revenue from overseas, though a big portion of that still comes in as United States dollars.

"Overall, the only surprise I think was in commercial licensing, where we had a little bit of a headwind from foreign exchange as well as macro conditions in China and Japan," said Amy Hood, Microsoft's chief financial officer, during a telephone interview with Reuters.

Commercial licensing refers mostly to Microsoft's sales of its Windows and Office products to enterprises, which is currently the largest source of revenues for the company.

Commercial revenue increased by 5 percent to $13.3 billion, with revenue from commercial cloud services growing by 114 percent as driven by Microsoft's Office 365, Azure and Dynamic CRM Online software.

Devices and Consumer revenue, on the other hand, increased by 8 percent to $12.9 billion, with the company's revenue from the once struggling Surface tablet reaching $1.1 billion, a 24 percent improvement that is driven by surging sales for the Surface Pro 3 and the device's accessories.

"This quarter's results show the product and business transformation underway at Microsoft," said Microsoft CEO Satya Nadella in a conference call with analysts. 

Last week at the Windows 10 preview event, Microsoft unveiled several innovations with the upcoming operating system that shows that the company is betting big on Windows 10. In addition, Microsoft also announced the HoloLens, a headset with augmented reality capabilities.

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