This was not your typical Microsoft earnings call. Marking just the second time that the company's CEO has presided over the quarterly kaffeeklatsch with analysts, Satya Nadella borrowed a rousing line from Friedrich Nietzsche while he pledged Microsoft would continue to embrace a future that may look very different from its past.
"In the months ahead, we will continue to intensely be focused on two things, rock-solid execution and pivoting the company towards the future. We will continue to push hard and move quickly, and you'll see the proof in that month after month in the products we build," Nadella said after the company reported better-than-expected earnings in its third fiscal quarter.
"What you can expect of Microsoft is courage in the face of reality. We will approach our future with a challenger mind set. We will be bold in our innovation. We will be accountable to our customers, partners, and shareholders," he added.
Nadella's "courage in the face of reality" line came -- unattributed -- courtesy of Nietzsche.
Nadella painted with broad brushstrokes many of the same themes that he's talked up since replacing Steve Ballmer as chief executive in February. And Nadella didn't have to sweat this one. He was on friendly ground with several analysts, who prefaced their questions by thanking him for making himself available on the call. The only other time a Microsoft CEO presided over a quarterly conference call was in 2009 when Ballmer attended because he wanted to be on hand after the company had announced layoffs.
Besides, this was a strong quarter for the company. Overall, Microsoft reported earnings of $6.97 billion, or 68 cents a share, on revenue of $20.4 billion, roughly flat with a year ago. Wall Street was expecting the company to report a per-share profit of 63 cents a share on revenue of $20.39 billion.
Windows volume licenses: Up 11 percent
Server products (including Windows Server and SQL Server): Up 10 percent
Commercial Cloud business: Up 101 percent
Consumer Office: Up 17 percent
Revenue by segment:
Device and consumer license: $4.38 billion
Device and consumer hardware: $1.97 billion
Device and consumer other: $1.95 billion
Commercial license: $10.32 billion
Commercial other: $1.9 billion
RBC Capital Markets' Matthew Hedberg said that "the real highlight of the quarter" was strong growth in Microsoft's unearned revenue, which came in at $19.51 billion. That was almost $1 billion above consensus estimates. The upshot: a more than a 2.5 percent spike in after-hours trading as Wall Street apparently liked what it saw.
So it was that Nadella spent most of his debut in the spotlight setting a strategy -- a discourse that often tended to the abstract at the expense of the specific -- but that was in keeping with the unfolding plan. Since replacing Ballmer, Nadella has used his public appearances to present a Microsoft that's steering into "the mobile first, cloud world" as it navigates across a changed technology landscape from the one in which Windows and PCs dominated the terrain.
Nadella said that his first 10 weeks or so have been extremely energizing, giving him an opportunity to "recharge, talk to different constituents, and relearn the place...and see it for the first time. Even in spite of having spent 22 years here, it's been fascinating."
At one point, he almost let his guard down when asked whether Wall Street should expect big changes in Microsoft's strategy following a strategic review.
Nadella said he intended to plan "on a continuous basis, executing on a continuing basis. It's not episodic." He added, "The only way we're going to succeed here is by having the notion that you're planning all the time, and you're also making the changes to your plan based on the changed circumstances, and I think that's the way to run a company like ours in a marketplace that's as dynamic as ours."
That was a signal to cue the corporate buzzwords.
"So this mobile first, cloud first is a deep thing for us," he said. "When we say mobile first, we mean mobility first. We think about users and their experiences spanning a variety of devices. As we look to the future, what are the set of experiences across devices, some ours and some not ours, that we can power through experiences that we can create uniquely? So that notion of having a central focus and a central purpose is what I think we have already signaled, and we are well on our way to execute on it."