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Microsoft Tops Projections Despite Slowing Sales

Microsoft has topped Q1 analyst projections, posting double-digit gains in sales and profits thanks to solid earnings in Azure cloud programs and Office online profits, although overall Surface and gaming revenue continues to decline.

According to Microsoft’s Q1 2020 financial results, revenue is up 14% ($33.1 billion) and net income has increase by 21% ($10.7 billion), thanks to the company’s cloud and online software earnings, as well as a slight rise in the sales (9%) of Windows to PC makers.

On the flip side, Microsoft saw declines in both gaming (7%) and Surface (4%) revenues, with the company attributing the latter on the fact they did not refresh or release any new Surface products during the quarter.

As for gaming, Xbox content and services revenues remained flat from a year ago ahead of the Christmas period.

On an earnings call with investors, Microsoft CEO Satya Nadella revealed that they are expecting this segment to continue its decline next quarter, dipping as much as 20% or more due to a lack of Xbox console sales.

Microsoft still receives more than 15% of its sales from Windows, although, that segment is heavily dependent on companies replacing their PCs for newer models.

This worked out well for Microsoft during the quarter with the company ending its support for Windows 7 and companies race to upgrade to the new Windows 10 OS in order to continue to receive updates and service.

The older software’s expiration is also helping boost sales of the company’s Microsoft 365 bundle, with 35.6 million now subscribed to Office 365 – up from 32.5 million last year.

Overall, the company’s PC sales have exceeded projections this year, with Microsoft’s legacy personal-computer business segment reporting revenue of $11.1 billion (average analyst estimates sat at $10.9 billion).

To take a closer look at Microsoft’s Earnings Release FY20 Q1, click here.

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