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Microsoft just reported revenue of $26.5 billion for the December quarter, up 8 percent, beating Wall Street’s expectations on the top line and turning in earnings of 71 cents per share — matching the projections of analysts polled in advance, but down from 78 cents a year ago.

The company said the earnings of 71 cents per share included a 4 cent charge “related to income tax expense resulting from an IRS audit adjustment.” Microsoft has been in a dispute with the IRS over the way the company accounts for transactions between international subsidiaries.

Microsoft said earnings were also reduced by $243 million, or 2 cents a share, due restructuring charges related to previously announced layoffs and the integration of the Nokia smartphone business.


Microsoft also said that it will complete its existing $40 billion share buyback authorization by Dec. 31 of next year.

The company said that its commercial cloud revenue, which includes its Azure cloud platform, Dynamics CRM service and Office 365 productivity suite for the enterprise, grew 114 percent year-over-year, and is operating at a $5.5 billion annualized revenue run rate.

Microsoft says that it’s the only cloud company at its scale to consistently grow revenue by triple digits.

RELATED: Microsoft’s commercial cloud business grows 114 percent

In its hardware business, Microsoft used a price cut in a bid to boost sales of Xbox One consoles for the holiday period. However, the 6.6 million Xbox One and Xbox 360 units reported by the company for the quarter was below the 7.4 units reported by the company for the holiday season a year earlier.

RELATED: Microsoft sold 6.6M Xbox consoles during the holiday quarter, down 12% from a year ago

The Redmond company said it sold 10.5 million Lumia units from October to December 2014. That’s up from both the 9.3 million Lumia devices sold in the previous quarter, and the 8.2 million units sold in the year-ago quarter.

Microsoft also saw growing sales for its tablet, as the Surface brought in a record $1.1 billion last quarter — up 24 percent from last year —  marking the first time Surface sales have eclipsed the $1 billion mark.

RELATED: Microsoft sold a record 10.5M Lumia smartphones last quarter; Surface revenue tops $1B

Analysts polled in advance by Thomson Reuters predicted revenue of almost $26.3 billion, up 7 percent, with earnings of 71 cents a share, down 9 percent from the same quarter a year ago. Investors will be listening closely for any information on the financial impact of the free Windows 10 upgrades announced by the company last week.

Worldwide PC sales stabilized in the quarter, in a positive sign for the Windows business. However, the company’s Devices and Consumer Licensing revenue, which includes Windows for consumers, fell to $4.17 billion for the quarter, from $5.5 billion a year ago. Commercial licensing revenue, which includes Windows and Officefor businesses, fell to $10.68 billion, from $10.9 billion a year ago.

Microsoft faced a tough comparable number on this front, as well, with the end of Windows XP support boosting PC sales a year ago. The company’s decision last year to offer Windows for free on small devices also had an impact on revenue this quarter.

Here are Microsoft’s divisional results, by fiscal quarter, with Q2 2015 representing the quarter reported today, ended in December 2014.


The company’s shares are down more than 3 percent in after-hours trading, as investors apparently react to the reduced commercial and consumer licensing revenue.

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