Not yet.

Microsoft narrowly missed analysts estimates and earnings and all but matched revenue expectations in the fiscal third quarter, but it offered weaker-than-expected guidance for the year, knocking its shares down in immediate after-hours trading and perhaps obscuring the bigger growth story.

Revenues were down about six percent over the year-earlier quarter, but not as much as has been the case in the first and second quarters, when sales fell 12 percent and 10 percent respectively. The trend indicates that Microsoft has nearly turned the corner on offsetting its declining software licensing revenues with cloud subscriptions.

And in the areas customers are watching most closely – cloud computing – the story is pretty good. Microsoft said Azure revenue grew 120 percent on a more than doubling of year-over-year usage. Sales of Azure premium services like Active Directory in the cloud grew by triple digits for the seventh consecutive quarter. Microsoft’s “Intelligent Cloud” segment, which includes Azure and cloud applications, is on track to exceed $25 billion for the fiscal year.

Nevertheless, the company’s “cloud-first” strategy isn’t yet making up for rapidly weakening desktop and server software licensing business. Microsoft said the overall slowdown in IT infrastructure spending will bring its annual results in a bit lower than expected. “In productivity and business process we’re continuing to expect strong annuity revenue and cloud growth,” said CFO Amy Hood. “It’s the weakness in our transactional business that’s affecting that dynamic.”

22 million Office subscribers

Office commercial products and cloud services revenue grew seven percent, driven by Office 365 revenue growth of 63 percent. Office 365 commercial seats grew 57 percent and Microsoft said it now has 85,000 partners selling office 365 to small business customers. There are now 22.2 million Office 365 consumer subscribers.

The number of new customers for the Dynamics CRM online service more than doubled year-over-year. Growth in both segments suggests Microsoft is successfully holding on to customers in its core product lines as they move from the desktop to the cloud. The company is also seeing growth in high-margin business products such as Office 365 Enterprise E3 and vertical-market applications of Dynamics. “Dynamics is expanding to include new scenarios such as Internet of things, field service, customer self-service and business intelligence,” said CEO Satya Nadella (above) on the company’s earnings call.

Outside the cloud, things aren’t as good. Windows OEM revenue declined two percent, although that was significantly below the 10 percent contraction in the overall PC hardware market. Windows 10 adoption appears to be steady. “The number of Windows 10 devices is twice that of Windows 7 devices at the same stage of launch,” Nadella said.

Mobile phone revenue was off 46 percent, reflecting Microsoft’s strategic decision to de-emphasize the handset business. But mobility wasn’t a total loss. The enterprise mobility customer base also more than doubled to more than 27,000, and the installed base grew nearly fourfold year-over-year, Microsoft said. It’s the third straight quarter of triple digit percentage growth. Revenue for the Surface hardware line grew 61 percent.

“Microsoft had an impressive quarter and repeated what they did in prior quarters in the combination of cloud, Azure and Windows,” said Patrick Moorhead (@PatrickMoorhead), president and principal analyst at Moor Insights & Strategy. The fact that desktop license revenues declined much less than the PC market is a noteworthy achievement, Moorhead said. And Microsoft is keeping its eye on the bigger goal. “Microsoft continues its transformation to a cloud company but has a way to go in mobility,” Moorhead said.

And in case you forgot that Microsoft has a search engine, its search revenue grew 18 percent on higher revenue per search and search volume. Nadella said more than 1,000 applications have been built on its Cortana intelligent search engine. Microsoft also said 35 percent of search revenue in March was driven by Windows 10 devices, though it didn’t reveal any figures on adoption of the new operating systems.

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