Microsoft just released its second quarter earnings  and the report shows that the company continues to grow its enterprise business but continues to struggle in many of its consumer businesses.
Microsoft posted strong gains over the same period last year in important enterprise services, like Azure, Office 365 for business users, and enterprise services. It also grew revenue in commercial licensing, which includes server products, Dynamics, and Unified Communications. This strength helped the company beat Wall Street's earnings expectations overall, as it posted profits of $6.6 billion on record quarterly revenue of $24.5 billion.
But its consumer businesses didn't fare as well. The segment that includes Bing and Office 365 Home Premium posted revenue of $1.8 billion in the quarter ending in December compared to $2 billion in the same period a year earlier (although Microsoft points out that the year-ago quarter included $380 million in Halo-related revenue, which didn't reoccur this year). Consumer licensing, which includes things like Windows Phone, Windows OEM, and Office for consumers, also went down, from $5.7 billion in the same quarter in 2012 to $5.4 billion in the most recent quarter. Earlier today, Nokia admitted  that sales of its Lumia Windows Phones actually dropped from the previous quarter -- surprising given that the holiday quarter is usually strongest for smartphones.
Microsoft did post gains in its consumer hardware segment, which includes Surface and Xbox. In fact, Surface revenue more than doubled sequentially, from $400 million in the previous quarter to $893 million in the December quarter. That sounds great, particularly following the nearly $1 billion write down  Microsoft had to take last year on Surface inventory. But using the likely average selling price of Surface tablets, that amounts to less than two million tablets sold. That's good for a single PC model from a single OEM. But it's a drop in the bucket compared with iPad sales, which analysts expect to come in around 25 million  for the quarter.
Microsoft's success in the consumer business is important as people increasingly want to bring their personal devices to work. If it can't win over consumers in product categories like tablets and phones, Microsoft will lose relevance over time.
That said, the enterprise market is Microsoft's core, and continued growth there will give the company time to make the transition.
The earnings report comes during a time of upheaval at the company. Not only is it working through a major restructuring, it is in the midst of a CEO search . After having only two CEOs in its history, Microsoft faces a daunting challenge in choosing a new leader.