Microsoft shares fall as tech giant falls short of revenue expectations, grossing $ 32.5 billion

Microsoft’s hardware team has had a huge holiday season and its cloud division continues to grow rapidly, but the company’s shares are down after posting mixed financial results for the quarter.

• Income: Microsoft reported revenue of $ 32.47 billion for its second fiscal quarter, up 12% from a year earlier and just below the $ 32.5 billion analysts expected .
• Benefits: Net income of $ 8.6 billion – or $ 1.10 per share, up 9% from a year ago – is slightly above analysts’ expectations of earnings of $ 1.09 per share

RELATED: Strong Cloud Revenue Growth in Q2 Continues to Drive Microsoft Forward

“Our strong cloud business results reflect our deep and growing partnerships with leading companies across all industries, including retail, financial services and healthcare,” said Microsoft CEO Satya Nadella, in a press release. “We deliver differentiated value across the cloud and the edge as we strive to earn customer trust every day. “

Microsoft stock is down about 2.7% on Wednesday afternoon. The main driver of the revenue decline was a 5% drop in Windows OEM revenue, the money Microsoft makes from selling Windows to computer manufacturers.

Microsoft divides the company into three main areas in its earnings reports. Here’s how each performed in the quarter ending December:

• In the company’s Productivity and Business Processes division, which includes Office 365 and LinkedIn, revenue increased 13% from a year ago to $ 10.1 billion.
• Intelligent Cloud revenue grew 20% to $ 9.4 billion, driven by 76% annual revenue growth from Azure.
• Revenue for the company’s More Personal Computing division, which includes its Windows PC business, Surface products and gaming teams, jumped 7% from a year ago to $ 13 billion.

Several areas of the company reached revenue milestones during the quarter.

RELATED: Microsoft Surface Reports ‘Biggest Quarter Ever’ As New and Updated Devices Pay Off

Area: Revenue for Microsoft’s Surface division, which is responsible for much of its hardware offerings, has been flat over the past holiday seasons. That has certainly changed this time around, as Microsoft reported a whopping 39% revenue growth for Surface from last year, to $ 1.86 billion.

Microsoft unveiled versions of the most popular Surface tablets and computers as well as the surprising new Surface headphones at an event in October. Revelation events in the fall, ahead of the holiday shopping season, have become a trend among most big companies, and it seems to have paid off for Microsoft this time around.

Game : The division that includes everything from Xbox hardware to Xbox Live subscriptions to revenue from games created by Microsoft as well as other studios, reached $ 4 billion in quarterly revenue for the first time, after growing 8% year on year.

The number of Xbox Live users rose from 57 million a year ago to 64 million in the last quarter, one of the biggest increases in years. Xbox hardware revenue is down 19% from last year when the Xbox One X was released, while Xbox software and services revenue is up 31%.

LinkedIn: Corporate social network revenues increased 29% from last year. Last quarter, Microsoft stopped reporting LinkedIn revenue and profit / loss as it continued to integrate the corporate social network into its organization more than two years after completing the $ 26 billion acquisition.

A year ago, LinkedIn generated $ 1.31 billion in revenue. A 29% year-over-year increase would bring revenue for the most recent quarter to just under $ 1.7 billion.

Highlights of the quarter