Productivity and Business Processes revenue decreased $184 million or 3%, mainly due to an unfavorable foreign currency impact of approximately 7%.
• Office Consumer revenue decreased $105 million or 13%, driven by an unfavorable foreign currency impact of approximately 9% and a decline in the consumer PC market, offset in part by revenue growth from Office 365 Consumer, mainly due to recurring subscriptions.
• Office Commercial revenue decreased $98 million or 2%, driven by an unfavorable foreign currency impact of approximately 7%, as well as lower transactional license volume, reflecting a decline in the business PC market. The decrease was offset in part by revenue growth from Office 365 Commercial, mainly due to an increase in subscribers and higher premium mix.
• Microsoft Dynamics revenue increased 3%, mainly due to higher revenue from Dynamics CRM Online, driven by seat growth.
Productivity and Business Processes operating income decreased $233 million or 7%, driven by lower gross margin, offset in part by a reduction in operating expenses. Gross margin decreased $363 million or 6%, primarily due to the decline in Office revenue, as well as higher cost of revenue. Gross margin included an unfavorable foreign currency impact of approximately 7%. Cost of revenue increased $179 million or 21%, primarily due to the increasing cloud mix of revenue. Operating expenses decreased $130 million or 6%, driven by lower sales and marketing expenses. Sales and marketing expenses decreased $89 million or 7%, mainly due to a reduction in headcount-related expenses.