Microsoft Q2: Surface, enterprise lead the charge

Microsoft's second quarter was marked by strength in cloud services as well as the enterprise.

Microsoft reported strong second quarter earnings and sales on the strength of its enterprise products. The company also garnered $1.1 billion in Surface revenue.

The company reported operating earnings of $16.3 billion, or 71 cents a share, on revenue of $26.5 billion. The results included integration charges for the Nokia purchase and restructuring charges. There's also a 4 cents a share income tax expense included.

Wall Street was looking for second quarter earnings of 71 cents a share on revenue of $26.33 billion.

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Microsoft's earnings report caps an eventful few days for the software giant. Last week, the company walked through its features for Windows 10 and introduced HoloLens and HoloStudio, two efforts to grab a foothold in mainstreaming virtual reality applications. In addition, Microsoft highlighted Surface Hub, which is a 4K display designed for enterprise collaboration and tied into the company's cloud services.

Following the Windows 10 shindig, Microsoft announced the acquisition of Revolution Analytics, which specializes big data using the R programming language. Also on the big data front, Microsoft is rumored to roll out its Cosmos big data services as a paid version.

Hands-on with the Windows 10 January Technical Preview (build 9926) | Microsoft to make Windows 10 free to Windows 7, 8.1 and Windows Phone 8.1 users | ZDNet Windows 10 coverage | Windows 10: The big questions ahead | Windows 10 goes hologram happy | Microsoft to offer a paid version of its internal Cosmos big-data service | Microsoft acquires Revolution Analytics

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Microsoft's quarter highlights how the company is transforming. Windows revenue is becoming less of a growth driver and commercial cloud revenue is now at a $5.5 billion run rate. Among the key figures:

  • Commercial cloud revenue was up 114 percent from a year ago and was led by Office 365 and Azure.
  • Server products and services revenue was up 9 percent from a year ago.
  • Windows volume licensing revenue was up 3 percent from a year ago.
  • Windows OEM Pro revenue fell 13 percent in the quarter as the enterprise PC upgrade cycle petered out.
  • Consumer Windows revenue also fell 13 percent.
  • Surface revenue was $1.1 billion in the quarter, up 24 percent.
  • Consumer Office 365 subscribers were 9.2 million at the end of the quarter.
  • The company sold 6.6 million Xbox consoles.
  • Phone revenue was $2.3 billion in the quarter with 10.5 million Lumia devices sold.
  • Windows Phone revenue fell 61 percent in the second quarter largely due to the end of Nokia's commercial agreement with Microsoft.
  • Consumer Office licensing revenue fell 25 percent from a year ago.

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