Microsoft’s Revenues Decline, But Due to Higher Profits, Shares Jumped Over 7 Percent

Microsoft reported revenues of $21.7 billion in the last quarter, a decrease of 6.6 percent compared to the same period last year, while the profit of this tech giant slightly increased.

According to Microsoft’s report released on Thursday, net income for the third quarter of this year was $4.62 billion, which is 1.8 percent higher than in the same period last year.

The revenue decline is primarily due to a 6 percent drop in sales of Windows systems to computer manufacturers for installation in new personal computers (PCs) compared to the same period last year.

However, this indicates that the sales decline has slowed, given that in previous quarters the rate of decline was double-digit, and according to data from the analytical firm Gartner, global PC sales fell by 7.7 percent year-on-year in the third quarter.

To stimulate Windows sales, Microsoft recently introduced the new Windows 10 operating system, which has been significantly better received in the market than the previous Windows 8 system.

On the other hand, revenues from the software giant’s cloud business, which includes products such as Windows Server and the Azure platform, increased by 8 percent compared to the same quarter last year, reaching $5.9 billion.

Excluding the impact of the high dollar exchange rate, revenues in this segment increased by 14 percent, accounting for 29 percent of the company’s total revenue.

Analysts believe these results show that Microsoft CEO Satya Nadella is successfully steering the company towards software and cloud business, while demand for the Windows operating system is weakening due to declining PC sales.

Revenues from the business that includes Windows fell by 17 percent in the last quarter to $9.4 billion, now accounting for 46 percent of total revenue. Excluding the impact of the high dollar exchange rate, revenues in this segment fell by 13 percent.

Microsoft generates about 54 percent of its total revenue outside the U.S. market, so it, like other American multinational companies, is harmed by the high dollar exchange rate, which has increased by about 17 percent over the past year against a basket of the world’s major currencies.

The report also shows that Microsoft eliminated about 1,000 more jobs in the last quarter than it announced. Due to business restructuring, after acquiring the mobile phone division of Finland’s Nokia last year, Microsoft announced the elimination of 7,800 jobs, or nearly 7 percent of the company’s total workforce worldwide.

Despite the decline in total revenue and only a slight increase in profit, Microsoft’s stock price rose over 7 percent on Thursday on Wall Street as the business results were better than analysts expected.