It's interesting that Lumia sales are up by more than 10%, but revenue through phone sales decreased by 38%. That was primarily caused by Microsoft's refusal to sell any flagship Windows Phones after they purchased Nokia. I was personally affected by that decision — after my Lumia 1520 broke, I had to reluctantly upgrade to an LG G4 because there are no flagship Windows Phones for sale anymore.
I believe they covered this - and is somewhat related to your flagship comment. They sold more of the cheaper Lumia variants (targeted at other markets than the US/your part of the world)
