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Microsoft Earnings Top Estimates Despite Dent From Nokia Integration, Layoff Costs

Revenue was up significantly, but profits took a hit amid restructuring charges.

Asa Mathat

Microsoft saw its September quarter earnings take a hit amid significant costs related to its biggest-ever job cuts and the acquisition of Nokia’s handset unit.

The software maker said Thursday it earned $4.5 billion, or 54 cents per share, on revenue of $23.2 billion. The costs related to restructuring amounted to $1.1 billion, or 11 cents per share, Microsoft said. The revenue was an increase from the $18.5 billion posted a year ago, but net income dipped amid the charges.

Analysts had expected per-share earnings of around 49 cents.

Microsoft CEO Satya Nadella sounded a positive note on cultural change at the company.

“We are innovating faster, engaging more deeply across the industry, and putting our customers at the center of everything we do, all of which positions Microsoft for future growth,” Nadella said in a statement. “Our teams are delivering on our core focus of reinventing productivity and creating platforms that empower every individual and organization.”

The company did not publish an earnings forecast for the coming quarter, saying it would provide outlook details on its conference call later Thursday.

As for its operating units, Microsoft said its Devices and Consumer unit revenue grew 47 percent to $10.96 billion. That included Surface revenue of $908 million and phone hardware revenue in excess of $2.6 billion, with 2.4 million Xbox console units sold. On the Windows Phone side, Microsoft said it sold 9.3 million Lumia smartphones.

Microsoft said its commercial unit, which comprises products sold to businesses, increased revenue by 10 percent, to $12.28 billion. The company highlighted an increase in server products and services of 13 percent, a five percent growth in business revenue from Office and a 128 percent increase in cloud-based revenue. Volume licensing of Windows grew 10 percent.

The company saw its revenue from new Windows PCs dip by 2 percent, with the drop attributable both to the less-than-robust PC market as well as new licensing programs that offer discounts on Windows or even free Windows for devices with screens smaller than nine inches.

Update: On the conference call with investors, Microsoft said to expect a further $500 million in restructuring charges. Combined with the $1.1 billion taken this quarter, that puts the company at the high end of its forecast for such charges. It forecast phone revenue to decline to $2 billion to $2.2 billion amid an expected drop in feature phone sales.

This article originally appeared on Recode.net.