Putting aside those deferrals and adjustments, Microsoft said non-GAAP revenues of $22 billion increased 1.6%, and EPS was flat at $0.62 or $5.1 billion.
Microsoft says Windows 10 is now running on more than 270 million machines, a healthy figure for software that was released only nine months ago.
Search ad revenue grew by 18 percent, thanks to growing Windows 10 usage. All the revenue from the software sale is eventually recorded, but at staggered intervals.
Some of that growth can be credited to Windows 10, which comes with a redesigned Web browser, and Cortana, a Siri-like digital assistant. Microsoft has never explicitly spelled out what Windows 10 sales are recognized in two years, which in three, and those in four.
That being said the company's results were in line with what some observers were predicting.
Microsoft does financial acrobatics to deal with the deferrals.
Surface revenue shot up 56% to $1.1 billion. At the end of the three years, the full $300 will have been recognized. Microsoft also gave weak guidance for the coming quarter, projecting between $21.7-22.4 billion in revenue for Q4 lower than the $23.1 billion consensus. More Personal Computing business is expected to generate revenue of $8.7 to $9 billion. Clearly, it's strategically important for Microsoft to have a stake in the mobile world, but unless it can start to achieve growth this year, it's hard to see Windows having a future as a phone operating system. But Windows revenue was down.
The revenue of Productivity and Business Processes segment clocked in at $6.5 billion, up 1% YoY.
As it has for years, Microsoft again blamed the struggling PC business for the decline in Windows revenue. If you ever thought that the platform can actually be competitive in today's market, now is the time to wake up.
On Monday, IBM reported its 16th consecutive quarter of revenue decline, as commercial customers abandon the once-standard model of buying programs to install on their own computers, and instead use more software online.
"The Surface sales are very impressive", Moorhead said. She presumably meant the more expensive - and larger - tablets and 2-in-1s, and the pricier PCs. Sales of Lumia devices were down 73% compared to the same quarter past year, with just 2.3 million devices sold - during the same period in 2015 8.6 million were sold.
That's the fiscal year after Microsoft's current fiscal year. Windows OEM revenue fell by 2%, but considering the double-digit declines in PC sales, this is a bit of a triumph.
"The total addressable market is huge, and we remain very excited about it", Nadella told analysts.
Source: Windows Phone sales are in freefall
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