Microsoft Q2 earnings: Revenue of $26.5 billion, $7.8 billion of operating income

Microsoft has announced its second quarter earnings (fourth quarter on a calendar year) and the company had revenue of $26.5 billion and $7.8 billion of operating income. These figures include $243 million of integration and restructuring expense which had a $0.02 per share impact.

For comparison, revenue was up 8% when compared to last year but operating income was down 2%; effective tax rate of 25% for the quarter.

As for the big figures, Surface had revenue of $1.1 billion, which is up 24% and was driven by Surface Pro 3 and accessories; this officially makes the Surface line of devices a billion dollar business.

Office 365 Home and Personal subscribers increased to 9.21 million users, which is up 30%. Seeing that subscription models are the future for Microsoft's revenue streams, this is good news for the company to see that consumers are willing to adapt this type of model.

Microsoft's phone hardware line had revenues of $2.3 billion with 10.5 million Lumia's sold and was driven by low end hardware. While Android and iOS devices tend to keep the spotlight in the smartphone market, selling more than 10 million devices in a quarter is a good sign for the company. But, Windows Phone revenue declined 61% for this quarter which was due to the Nokia acquisition which terminated an agreement of $650 million.

In the gaming division, Microsoft said that they sold 6.6 million consoles but they did not breakdown the SKUs so we don't know the split between Xbox One and the 360. Revenue for Xbox decreased 20% for the quarter which is likely attributed to the price cut of the Xbox One for the holiday shopping season.

Search revenue grew by 23%, with Microsoft saying that Bing has a US market share of 19.7%. With Windows 10 expected to drive more searches to Bing, with Cortana and Spartan likely going to keep users from switching browsers and search engines, the positive growth for Bing is likely to continue for the foreseeable future.

Overall commercial cloud revenue, which includes Office 365, Azure, and Dynamics CRM Online grew by 114% with an annualized revenue run rate of $5.5 billion. Server products and services grew by 9% with the company saying that there was double-digit growth for SQL Server and System Center.

Microsoft will be holding a conference call at 2:30 PM PT / 5:30 PM ET to discuss the earnings.

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