Microsoft Surface sets $1bn revenue record, but Q2 results are merely 'good enough'

Just 18 months after Microsoft wrote down more than $900 million (£600m) in unsold Surface stock, the company's tablet range has finally found its feet, passing the $1bn revenue mark for the first time this quarter.

As Microsoft's determination to be taken seriously as both a software and hardware company continues, strong sales of its Surface Pro 3 tablet and accessories brought in $1.1bn in revenue for the second quarter of financial year 2015, up 24% on the same period last year and setting a new record for the Windows tablet.

The good news for Surface comes just days after Microsoft wowed the technology press with two new hardware innovations. The first, called Surface Hub, is a huge 84in, 4K video conferencing screen. The second, called HoloLens, marks a major step forward in hologram technology, blurring a computer interface and software with reality in a way Google Glass failed to achieve.

But tablet - and hardware sales generally - still represent a tiny share of Microsoft's finances, as total income for the quarter was $5.9bn from $26.5bn revenue. Revenue was up 8% on the same quarter last year, but income fell 10%, partly due to $243m of "integration and restructuring expenses" related to its purchase of Nokia's phone-making business.

Microsoft's share price was down almost 5% in pre-market trading at the time of publication.

Headline numbers were 'good enough'

"While currency is a headwind for Microsoft and other large international companies, we would characterize the headline numbers as good enough, although some bulls may have been hoping for a bigger beat," said Daniel Ives, an analyst at FBR Capital Markets, speaking to Reuters.

As usual, Microsoft has not revealed exactly how many Surfaces it sold during the quarter, despite the reversal in fortune since the original Surface's shaky start in 2012. That said, the company still has a long way to go before it can challenge Apple, which sold 12.2 million iPads in the last quarter.

Freshly acquired from Nokia, the Lumia smartphone division saw 10.5 million unit sales, up 28% from 8.2 million in the same quarter last year - and setting a new record in the process.

As the Xbox One passes its first birthday, Microsoft's gaming division saw sales fall from the same pre-Christmas quarter last year, down from 7.4 million units (combined Xbox 360 and Xbox One) to 6.6 million, despite price cuts to both consoles.

Microsoft's Office 365 Home and Personal saw its subscriber base increase from 3.5 million a year ago to 9.2 million now.

Away from consumer sales, Microsoft saw continued success from its server and cloud products. Revenue from commercial cloud services like Office 365 grew by 116% compared to last year, while server revenue was up 9%.