Microsoft bursts through to Surface above cloud with record Q1 revenues

25 Oct 2018

Image: Microsoft

Software giant fires on all cylinders, from cloud to enterprise, gaming and hardware.

Microsoft has posted record new Q1 2018 figures, with revenues up 19pc to a whopping $29.1bn.

The Redmond-based software giant was able to report profits were up 34pc to $8.8bn as bets on hardware and the cloud saw it soar to new heights.

‘We’re excited to help our customers build the digital capability they need to thrive and grow’

For one thing, the company’s Surface hardware unit is now a $1.1bn business in its own right – you read that correctly. Microsoft has been steadily pushing the boundaries of personal computing since 2012 and it has been ramping up the competition against Apple for computational elegance.

Microsoft finds the silver lining in the cloud

“We are off to a great start in fiscal 2019, a result of our innovation and the trust customers are placing in us to power their digital transformation,” said Satya Nadella, chief executive officer of Microsoft. “We’re excited to help our customers build the digital capability they need to thrive and grow, with a business model that is fundamentally aligned to their success.”

Microsoft returned $6.1bn to shareholders in the form of dividends and share repurchases.

The company’s Productivity and Business Processes group – which includes Office commercial products – reported a 19pc rise in revenues to $9.8bn. Included in this were a 33pc increase in LinkedIn revenue and a 20pc increase in Dynamics products and services.

Revenues in Microsoft’s Intelligent Cloud unit were $8.6pc, up 24pc thanks to strong sales of server products and cloud services.

Microsoft’s More Personal Computing group reported a solid 15pc rise in revenues to $10.7bn, driven by Windows OEM revenues, a whopping 44pc rise in Xbox software and services, as well as search advertising revenue.

Revenues from Surface products increased 14pc in Q1 and, during the quarter, Microsoft broke through to become a top five computer manufacturer in the US.

This is all the more startling when you consider Microsoft wasn’t making computer hardware six years ago. Now, it has the success of a range of Surface products on its hands, including a fleet that boasts the Surface Go, the Surface Pro 6 and the Surface Laptop 2. New products including the Surface Studio 2 and Surface Headphones are due to launch next month.

It is quite the turnaround for a software giant that, after the success of Windows 7 in 2009, blundered its way through the smartphone revolution and finally found its feet through the steady leadership of Nadella, with an uncompromising vision of what cloud computing is really all about.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years