Microsoft recently reported fiscal first-quarter earnings that topped Wall Street expectations, but the good news was tempered by news that Windows, hardware, and Xbox sales all saw declines compared to the same time a year ago. The company reported revenue of $10.75 billion, up 5 percent from a year ago, and diluted earnings per share of $1.13, up 8 percent from the same period last year.
Despite the solid overall results, Microsoft’s Windows, hardware, and Xbox divisions all saw weaker-than-expected sales. Windows revenue declined 4 percent in the quarter on a year-over-year basis, as Windows OEM revenue decreased 7 percent and Windows commercial products and cloud services revenue increased 4 percent. The weak Windows sales were attributed to weaker-than-expected consumer PC demand during the holiday quarter.
Microsoft’s hardware division also had a rough quarter, with revenue slipping 3 percent due to lower Surface device sales. The company says it will launch a new range of hardware products in the coming quarters to bolster sales.
The Xbox division was also a weak spot in the quarter, with revenue down 6 percent from the same time a year ago. Although Microsoft saw strong demand for its Xbox One X consoles, it was offset by lower prices of its previous-gen Xbox One S.
Still, Microsoft CEO Satya Nadella was pleased with the company’s overall performance in the quarter. “We are driving sustained commercial momentum by relentlessly focusing on our customers’ needs,” said Nadella. “Our integration of LinkedIn continues to drive growth in Office 365 commercial and Dynamics 365, which are both critical to our intelligent cloud strategy.”
Despite the weak sales in the Windows, hardware, and Xbox divisions, it’s clear that Microsoft’s overall performance was strong. The company is continuing to focus on its cloud products and services, which are becoming increasingly important to the company’s overall success. It will be interesting to see how Microsoft can improve its hardware and Xbox divisions in the coming quarters.
