Microsoft posts $23.6B in revenue in Q3 with Azure being star highlight

Just like other prominent players of tech industry like Amazon, Google, and Samsung, Microsoft too posted its earning report on Thursday. And while Microsoft met most of the Wall Street expectations it fell slightly short on the revenues front. The Redmond based company's continued growth was once again led by its cloud and productivity segments, while sales for Surface devices slowed due to renewed competition from Apple.

The company reported non-GAAP revenue of $23.6 billion and non-GAAP earnings per share of $0.73. In Q3 2016, Microsoft saw $22.1 billion in revenue, net income of $5.0 billion, and earnings per share of $0.62.

Despite getting its prediction mostly right, Wall Street wasn’t all that impressed by the earnings, and Microsoft’s stock was trending down by almost 2 percent in after-hours trading.

Microsoft also shed light on other important financial figures to define the growth of their company. It reported that the non-GAAP operating income amounted to $7.1 billi0n whereas the net income stands at $5.7 billion for the third quarter. Also, Redmond based company returned $4.6 billion to its shareholders in the form of either share repurchases or dividends.

“Our results this quarter reflect the trust customers are placing in the Microsoft Cloud. From large multi-nationals to small and medium businesses to non-profits all over the world, organisations are using Microsoft’s cloud platforms to power their digital transformation," Microsoft CEO Satya Nadella said in the earnings announcement.

The main highlight of the earnings report was undoubtedly Cloud. Total revenue from Microsoft’s “Intelligent Cloud” business hit $6.8 billion this quarter. Most importantly, Azure revenue was up 93 percent, a number that was driven both by increased demand for the core Azure compute services as well as Azure’s premium services. Azure’s annual run rate is now $15.2 billion, which puts it on track to hit the $20 billion run rate Microsoft has long expected to achieve by 2020.

As expected, Surface revenue was down this quarter. That's specifically because Microsoft has not significantly refreshed its Surface Pro or Surface Book line. As a result, Surface revenue dipped 26 percent to $831 million.

On the other hand, Windows OEM revenue was up 5 percent year-over-year, and Windows commercial products and cloud services revenue also increased by 6 percent compared to the same period last year. The Windows boost comes as the PC market appears to be stabilising slightly. The Redmond-based company isn't saying much about its mobile plans, but its phone revenue dipped $730 million this quarter.

The productivity segment tends to be dominated by revenue from products like Office and Dynamics. In total, Microsoft reported revenue of $8 billion for this group of products, compared to $6.5 billion a year ago.

This quarter also happens to be the first quarter earnings report since LinkedIn acquisition. With several initiatives and recently added features, LinkedIn contributed $975 million of revenue.