Microsoft profits fall by 25% due to drop in Windows and Windows Phone sales

Microsoft's profits have fallen by 25% for the latest quarter, in part due to slow Windows sales as well as profit declines in certain units due to a higher than expected tax rate and being hit by a stronger US dollar.

For the quarter ending 31 March 2016, Microsoft's net income dropped year-on-year by 25% to $3.76bn (£2.6bn, €3.34bn), while revenue felt to $20.5bn. These figures were less than Wall Street's expectations and caused shares to fall by over 4% in after-hours trading.

Microsoft's More Personal Computing unit, which includes products such as Windows, Surface and Windows Phone, saw its operating profit jump by 57% during the quarter and sales for the consumer version of Windows grew by 15%, but sales of the enterprise edition of Windows fell by 11%. This is believed to be due to the overall shrinking PC market as well as the impact of the strong dollar. Windows Phone also saw its sales plummet by 46%.

As for Microsoft's Intelligent Cloud unit, home to the Azure cloud business, revenue grew by 120%, driven by strong sales of Azure compute and SQL databases, but operating income for the unit as a whole fell by 14% compared to the same quarter last year.

Meanwhile, the Productivity and Business Processes Unit saw a 53% increase in Office 365 sales to businesses and reported that it now has a consumer customer base of 22.2 million Office 365 users, although the unit's operating profit still fell by 6.6% year-on-year during the quarter.

Looking at the Microsoft gaming unit, sales grew by 4% to $64m due to a growth in Xbox Live transactions and revenue from popular video games such as Minecraft. However, Xbox Live monthly active users were down by two million compared to the 48 million subscribers reported in the previous quarter.

Microsoft is not the only major tech firm to be having troubles – chipset manufacturer Intel's shares fell by 3% in after-hours trading after announcing its plans to cut 12,000 jobs globally – equivalent to roughly 11% of its total workforce.

The move comes as Intel's chip sales are also affected by the overall global PC market downturn, which has seen Windows-based PCs fall to a 90% market share, with steep competition from Apple and Google's mobile devices.