Microsoft has posted a larger than expected quarterly profit with sales of its much-hyped Surface tablet finally gaining traction.
The software giant released its second quarter results yesterday, with the firm posting a profit of $6.56 billion on the back of $24.52 billion revenue.
During a conference call to announce its Q1 results in October, when it recorded a $5.2 billion profit, the vendor’s chief financial officer Amy Hood said the firm was set up for a “fantastic holiday season” with its Surface and Xbox One devices.
Judging by yesterday’s results, it seems Hood’s premonition wasn’t far off. Surface sales came in at $893 million, having doubled from $400 million in Q1. However, the production and marketing costs associated with the devices ($932 million) mean Microsoft is not profiting from this uptick in sales.
In a conference call with analysts to discuss the results, transcribed by Seeking Alpha, Hood said – despite not making a profit on the devices – the firm is committed to the product line’s continued development.
“When we launched Surface just a year ago, our goal was really to create a product that showcased what can happen when you innovate in hardware, in the service, and in the software. And we’ve learned a lot over the course of this journey. And we need to make more meaningful progress,” said Hood.
Meanwhile, the Xbox One, which was released in November, has shifted 3.9 million units since its release, while Xbox 360 sales topped 3.5 million.
Another bright point in the company’s results was its continued success in the enterprise, with its SQL Server product and commercial cloud services all performing strongly. So much so, the company’s commercial revenue grew 10 per cent in Q2.
“We significantly outpaced enterprise IT spend, as we continue to take share from our competitors by delivering the devices and services our customers need as they transition to the cloud,” explained Kevin Turner, chief operating officer at Microsoft.
“Our commercial cloud services revenue grew more than 100 per cent year-over-year, as customers are embracing Office 365, Azure, and Dynamics CRM Online, and making long-term commitments to the Microsoft platform.”
The results could be the last set Steve Ballmer, Microsoft’s outgoing CEO, presides over, as reports suggest the firm is closing in on selecting his successor.
However, no mention was made during the conference call about who the current crop of runners and riders could be or how the search was progressing.