Microsoft Corporation (NASDAQ:MSFT) shares dipped more than 5% in after hours trading after it reported lower than anticipated third quarter earnings.
The world’s largest software company saw net income fall to $3.76bn in the third quarter, compared to $4.99bn the previous year.
Revenues fell from $21.73bn to £20.53bn, although it was less than analysts had expected.
Revenues in its cloud business rose 3.3% to $6.1bn, but operating profits at the division dropped 14%
Microsoft’s finance chief Amy Hood said the transition to the cloud had weighed heaving on margins, explaining the decline in profit for the period.
The firm has invested heavily in its cloud services as it sees a decline in the traditional on-site server business. Net capital expenditure rose to $16.8bn, an all-time high for the company.
Its phone business saw the biggest decline where sales halved. A 9% shrink in the PC market during the quarter impacted overall sales, but less than expected.
Pressure from a strong dollar also impacted the results, which Microsoft expects to continue. Sales in its Latin America, Middle East and Africa regions were also lower than expected.
Shares slumped from $56.03 to lows of $52.70 in after hours trading.