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Microsoft Shares Wobble Despite 16% Lift In Revenues

Microsoft saw its stock fall as much as 2.5 percent last night despite a positive result.

Personal Computing, which includes Windows, devices, gaming and search ads, produced $9.92 billion in revenue, up 13 percent year over year.

Revenue grew by 16% to $26.82 billion, vs. $25.77 billion for the prior period last year.There was no mention of unit sales for XBox or revenue contributions for their struggling gaming platform.

Recently Microsoft aquired gaming start-up PlayFab, and it announced a major reorganization that included the departure of Windows and Devices chief Terry Myerson from the company.

The Windows and Devices Group was effectively split up and put inside the Experiences and Devices group (which includes Microsoft’s Office 365 and other productivity applications) and the Cloud and Artificial Intelligence Platform group (which includes infrastructure products like Windows Server and the Azure cloud platform).

“We think folding Windows into the new Experiences and Devices division, which is led by a former Office executive, sends a strong signal of the supporting, and not leading, role Windows will likely take in coming years, and we like the continued emphasis on hybrid cloud and [artificial intelligence],” Stifel analysts Brad Reback wrote recently.

Windows still remains the main revenue contributor for Microsoft’s More Personal Computing business segment. One indicator for Windows sales, IDC’s PC shipments, was flat year over year in the first quarter of 2018 but better than expected, the Stifel analysts wrote.

Intelligent Cloud contains the Azure public cloud, which competes with Amazon Web Services and represents Microsoft’s biggest growth driver overall. Microsoft as usual didn’t provide an exact revenue figure for Azure but did say revenue rose 93 percent year over year, which is down sequentially from 98 percent revenue growth. The Stifel analysts said they were expecting growth just over 90 percent, while analysts led by Kirk Materne at Evercore ISI said in a Sunday note they were looking for 82 percent Azure growth.

There were 30.6 million Office 365 consumer subscribers in the quarter, up sequentially from 29.2 million. On the Office 365 commercial side, revenue grew 42 percent.

Microsoft’s Dynamics 365 revenue increased 65 percent, while LinkedIn revenue grew 37 percent, and Surface revenue rose 32 percent.

The company reported $3.5 billion in capital expenditures, its highest level yet and up 66 percent year over year.

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