Microsoft Fiscal Q2 Beat The Street As Windows 10 Licensing Shows Steady Gains

Microsoft ended 2016 on a high note by capping off the final three months of the year (which is Microsoft's second fiscal quarter of 2017) with revenue of $26.1 billion, net income of $6.5 billion, and earnings per share of $0.83. Those figures come in slightly higher than what Microsoft recorded in the same time period a year earlier and were enough to beat out analysts' expectations.

"I am pleased with our results this quarter. We see strong demand for our cloud-based services and are executing well on our long-term growth strategy," said Amy Hood, executive vice president and chief financial officer at Microsoft.

Windowws 10 PC

Investors should be pleased too, as they saw $6.5 billion returned to them in the form of share repurchases and dividends during the three-month period ended December 31, 2016. A big reason why is the continued adoption of Windows 10. Even now that the free upgrade promotion is over (except for customers using Microsoft's assistive technologies), Microsoft saw a 6 percent rise year-over-year in Windows OEM Pro revenue (largely enterprise customers), while revenue from Windows 10 OEM non-Pro (mostly home consumers) jumped 5 percent.

The continued adoption of Windows 10 is key to Microsoft's strategy of monetizing its services that tie into the OS. That strategy seems to be working. Microsoft saw its Productivity and Business Processes revenue grow 10 percent to $7.4 billion, which included 5 percent growth in its Office commercial products and cloud services revenue, driven by Office 365 commercial revenue growth of 47 percent.

Microsoft saw its Xbox console sales decline, though Xbox software and services revenues went up, with digital transactions reaching $1 billion for the quarter. And as expected, phone revenues were way down, dropping 81 percent as Microsoft looks to get out of the handset business. It sold its feature phone business to Foxconn during the quarter and tried to dump its remaining Lumia stock as it focuses on other areas.

The Redmond giant also reported from its LinkedIn acquisition, which it acquired for $26.2 billion last month. LinkedIn added $228 million in revenue and posted an overall loss of $100 million during the quarter.