Microsoft is finding success with offering online services or platforms that combine datacenter computing power, artificial intelligence and capabilities of smartphones or other devices at the user "edge" of experiences, according to Nadella. The tactic is a major switch from the way the Redmond-based company built its empire selling packaged software to computer users and Windows operating systems powering machines.
Microsoft still licenses Windows to computer makers and expected to see revenue from sales in the unit rise through the end of the year as it stops providing updates and support for a Windows 7 version. Technical support and software updates such as security patches are to stop being available in mid-January of next year, according to Microsoft.
Meanwhile, revenue from its career-centric social network LinkedIn was up 25 percent, Microsoft reported. Microsoft shares were up essentially a fraction of a percent in after-market trades that followed release of the earnings figures. Nadella has moved Microsoft to focus on cloud computing and other business services, helping the company's valuation grow to $1 trillion and draw even with rival Apple in terms of market value.
While the quarterly earnings, overall, beat market expectations, there was a sign that revenue growth in Microsoft's cloud unit Azure might be slowing. Microsoft reported that it saw no growth in revenue from Xbox software or services, and that sales were drooping of the latest generation Xbox console that debuted nearly six years ago because there is a successor on the horizon.
Microsoft in June gave the world a first glimpse of a powerful next-generation Xbox that it aims to release late next year. The new Xbox was promised to be released in time for the Christmas holiday shopping season in 2020. Xbox battles in the console gaming arena with Sony, which is working on a new generation PlayStation. Microsoft last week started trials of an "xCloud" project that allows subscribers to stream play from the cloud, Nadella said.