Microsoft was once heavily criticized for deciding to sell its own hardware, and specifically the Surface. From the outside looking in, observers (and even Microsoft’s own hardware partners, such as Acer) thought Microsoft was getting in over its head and underestimating how difficult it would be to compete in that space. Fast forward to today it’s an entirely different story. Microsoft just posted a stellar earnings report for the first quarter of 2018, and the Surface is one of the reasons why the numbers are strong.
The company’s revenue increased 16 percent to $26.8 billion in Q1 2018. Microsoft also saw a 23 percent increase to $8.3 billion in operating income, and posted a healthy profit of $7.4 billion for the quarter, which represents a staggering 35 percent jump. Microsoft’s strategies across the board are paying off, and in a big way.
“With consistent investment and strong sales execution, this quarter we achieved better than expected performance across all segments,” said Amy Hood, executive vice president and chief financial officer at Microsoft. “We delivered double-digit revenue and operating income growth driven by 58% growth in our commercial cloud revenue.”
How about the Surface? Microsoft said Surface revenue grew 32 percent, the only caveat being that the prior year was impacted by “product end-of-life-cycle dynamics.” Even so, it’s a remarkable bump in sales, and it shows that its Surface strategy is sound.
Microsoft also saw an 18 percent increase in gaming revenue driven primarily by its efforts in the Xbox ecosystem, along with 21 percent growth in revenue from Windows commercial products and cloud services. It all added up to $9.9 billion in the personal computing space.
The cloud was kind to Microsoft, too. Revenue from its Intelligent Cloud business increased 17 percent to $7.9 billion, highlighted by a whopping 93 percent jump in Azure revenue growth.
“Our results this quarter reflect the trust people and organizations are placing in the Microsoft Cloud,” said Satya Nadella, chief executive officer of Microsoft. “We are innovating across key growth categories of infrastructure, AI, productivity, and business applications to deliver differentiated value to customers.”
Microsoft has made a concerted effort to flesh out its cloud offerings, and it’s easy to see why. Windows alone is not enough to sustain the company’s business model. In fact, Windows OEM revenue saw just a 4 percent increase. That number would probably be higher if Microsoft was still releasing and selling brand new versions of Windows every so often, but with Windows 10, it has a unifying platform to build an ecosystem around.
The bottom line is that what Microsoft is doing is clearly working.
Top Image Source: Wikimedia Commons via Coolcaesar