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Editor’s Note: Revenue figure corrected since original post.

Microsoft reported revenue of more than $22 billion for the March quarter, but its earnings of 62 cents per share came up short of analysts’ expectations.

Analysts polled in advance by Thomson Reuters had expected the company to post earnings of 64 cents a share. The company blamed a higher-than-expected tax rate for the earnings miss, due to a changing geographic mix of its business in areas including cloud computing.

msft

The company’s cloud business continued to represent a bright spot, with Microsoft reporting that the annualized run rate for its commercial cloud business now exceeds $10 billion. Microsoft has a goal of reaching a $20 billion annual commercial cloud run rate by its fiscal year 2018.

Revenue from the company’s Office 365 productivity subscription service was up 63 percent, and consumer subscribers to Office 365 reached 22.2 million, according to the company. Server products and cloud services revenue grew 5 percent, and Azure revenue grew 120 percent.

Meanwhile, revenue in the company’s Surface business climbed 56 percent from the same quarter a year ago, to more than $1.1 billion. Microsoft said the result was driven by sales of Surface Pro 4 and the Surface Book notebook.

However, the company’s traditional Windows business continued to slip, with sales of Windows to computer makers declining 2 percent. Phone revenue declined 47 percent to $746 million. The company sold 2.3 million Lumia smartphones in the quarter, down from 8.6 million a year earlier, as it has been de-emphasizing its smartphone business.

Microsoft reiterated that Windows 10 is now active on more than 270 million devices. Microsoft said that growth is helping to drive an increase in search advertising revenue, which rose 55 percent to more than $1.5 billion. Meanwhile, the Xbox Live monthly active user base grew 26 percent to 46 million.

The company’s earnings conference call starts at 2:30 p.m. Pacific.

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