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Microsoft: Cloud and Windows OEM sales up, but Surface? No, not even during WFH boom

Water's wet, sky's blue, and Redmond's revenues grew in Q1 2022

Even a "stronger than expected" PC market with unprecedented demand from homebound workers couldn't lift Surface revenues in Microsoft's first quarter for fiscal 2022 - in an otherwise stellar quarter for the firm.

Windows OEM revenue increased by 10 per cent – driven, as CFO Amy Hood said in an analysts' call, "by a stronger than expected PC market."

However, Surface revenue dropped by 19 per cent in constant currency (although Hood pointed to a strong prior year) for the quarter, which ended September 30, 2021. Supply constraints will certainly have played a part in this, as well as a line-up due for a refresh. The recent product launch will make next quarter's results interesting reading. Hood reckoned the decline would likely run on, but only in single digits "as we continue to work through supply chain uncertainty, particularly in our premium devices."

Microsoft otherwise reported another set of impressive results last night, notching up a 22 per cent increase in revenues to $45.3bn for Q1 of its fiscal 2023, ended 30 September.

That $45.3bn figure was made up of $15bn for Productivity and Business Processes (up from $12.3bn the previous year), $17bn for the Intelligent Cloud 9 (up from $13bn), and $13.3bn for Personal Computing (up from $11.8bn).

Hood also gave some figures for the Microsoft 365 subscriber count, which had grown by 50 per cent and stood at 54.1 million this quarter. The number of paid Office 365 commercial seats also jumped by 17 per cent year-on-year while Power Apps saw 197 per cent growth in constant currency.

Windows revenues were up, however, CEO Satya Nadella made the bizarre claim that "Windows 11 is also the most open platform." Open, it seems, to all except those who dare to run hardware not on its limited compatibility list. On that topic, Hood had some news for customers expecting that kit bought in the last few months would be OK.

It appears not: "With nearly all devices built this quarter eligible for upgrade" (our emphasis). According to Hood, it seems there could be a good few customers left out in the cold.

Still, Microsoft comfortably blew past its estimates and those of analysts. While it did not break down the dollar value of its sales, a growth of 48 per cent growth (in constant currency) in Azure and "other cloud services" is not to be sniffed at. The markets agreed; at time of writing the company's shares were up by just under $2 and headed towards a record high. ®

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