Surface Pro XSource: Daniel Rubino/Windows Central

What you need to know

  • Surface revenue is up 1 percent year-over-year.
  • Microsoft pulled in $1.3 billion in Surface revenue, holding steady.
  • More Personal Computing division revenue is up 3 percent.
  • Windows OEM revenue was relatively unchanged year over year.

Update: Microsoft is expecting strong demand for Surface next quarter with revenue growth in the "low teens." Windows growth in "low to mid single digits."

Microsoft's earnings report is out for the third quarter of its 2020 fiscal year, and the company raked in $35 billion beating a $33.86 billion estimate.

The big news for More Personal Computing, especially the Surface division, is good all around. Microsoft is reporting $1.3 billion in revenue for Surface, which is up just one percent year-over-year ($1.329 billion).

That number contrasts with the figures for early January, which pegged Surface revenue at nearly $2 billion.

Surface Fy20 QSource: Microsoft

As has become a theme in recent earnings reports, Microsoft's cloud business continued to shine. Its revenue overall in the Productivity and Business Processes segment was up 15 percent to $11.7 billion. Meanwhile, revenues in the Intelligent Cloud segment were up 27 percent to $12.3 billion. The leading indicator there was that server products and cloud services revenue saw a gain of 27 percent, led by Azure revenue growth of 59 percent.

In the More Personal Computing segment, which encompasses Windows, Xbox, Search, and Surface, revenue reached $11 billion, which represents a three percent increase. Windows OEM revenue stayed flat year over year, while Windows Commercial products saw a rise of 17 percent. Search advertising revenues rose one percent.

Microsoft does not break out the numbers for Surface individually, so it is unclear which device is selling the best. Microsoft launched Surface Pro 7, Surface Pro X, and Surface Laptop 3 (including a new 15-inch model) in late 2019.

Undoubtedly, the current pandemic has had an impact on supply chains from China, consumer purchasing power, demand, and the needs of growing work-from-home employees.

Windows 10 non-Pro revenue did decline by 10 percent "driven by continued pressure in the entry-level category and supply chain constraints in China." On the flipside, Windows OEM Pro revenue was up 5 percent due to "strong Windows 10 momentum" and "demand from remote work and learn scenarios offset by supply chain constraints in China."

However, Microsoft was quick to point out that overall, "COVID-19 had a minimal net impact on the total company revenue."

More information on guidance for next quarter is expected on the Microsoft earnings call at 5:30 PM ET. This article will be updated with that information as it becomes available.

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