Productivity and business processes in fiscal 2Q16

So far, we have discussed Microsoft’s (MSFT) MPC (More Personal Computing) and Intelligent Cloud segments’ performance in fiscal 2Q16. Now, we’ll look at how its Productivity and Business Processes segment performed.

Microsoft’s Productivity Business Processes segment encompasses the cloud version of Office, Office365, as well as its traditional version. The segment also includes Microsoft Dynamics and Dynamics CRM Online. In fiscal 2Q16, this division grew 5% to $6.7 billion in constant currency terms, as the below presentation shows.

How Microsoft’s Productivity Business Performed in Fiscal 2Q16

Office 365 continued to report 70% growth in fiscal 2Q16

Microsoft primarily generates its cloud revenues from Office 365, Dynamics CRM, and Azure, its cloud-computing platform. As customers continue to shift to Office 365, the Office 365 subscriber base has expanded. In 2Q16, Microsoft stated that Office 365 grew by approximately 70% with its subscriber base rising by 20.6 million subscribers.

In 2Q16, Microsoft stated that more than 30 million of Apple’s (AAPL) iOS and Google’s (GOOGL) Android devices ran Outlook “with 1.6 billion sessions per month on phones and tablets.” Microsoft Dynamics revenue grew 11% in constant currency terms while fiscal 2Q16 marked the fifth straight quarter when Dynamics CRM Online seat additions more than doubled on a YoY (year-over-year) basis for the fifth consecutive quarter. In 2015, Microsoft wanted to acquire Salesforce (CRM) to boost Microsoft Dynamics. However, the acquisition didn’t materialize.

Investors who want to gain exposure to Microsoft could consider investing in the SPDR S&P 500 ETF (SPY). SPY invests ~2.4% of its holdings in Microsoft. It also invests ~8% of its holdings in the application software segment.

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