Microsoft posted a better-than-expected results for its fiscal Q2 today, earning a net income of $6.56 billion on revenue of $24.52 billion (all numbers USD).
The company showed growth in a number of areas, but it was the Surface division that surprised the most: after writing off nearly $1 billion in Surface RT inventory, the same division earned $893 million in revenue this quarter, more than double that of the previous quarter. While the Surface product line is not yet profitable for Microsoft — cost of revenue for the Surface was a slightly-higher $932 million — it bodes well for the future of the tablet/laptop hybrids.
Both the Surface 2 and Surface 2 Pro launched at the beginning of Q2 and fixed many of the issues of its predecessors. Specifically, the performance issues that plagued the Tegra 3-based Surface RT were eliminated with the Tegra 4-running Surface 2, and the stand was extended on both to ensure more comfortable lap placement. Microsoft is still dealing with a dearth of great Windows 8 apps, but the Windows Store is slowly being populated by popular brands like Facebook, Twitter and Flipboard.
Now that the deal to purchase Nokia’s Devices & Services division is almost complete, the balance sheet may look a little different three months from now, but Microsoft is in a good position, both cash- and resource-wise, to lead the Lumia division to success.