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Software giant Microsoft reported better than expected September quarter earnings Wednesday after the close. Cloud offerings, Azure infrastructure services, Office 365 productivity software and Dynamics enterprise software were all ahead of forecasts last quarter..


Microsoft is the clear No. 2 provider of on-demand computing processing and storage behind market pioneer Amazon.com.

Microsoft Third Quarter Earnings After Wednedsay Close

$1.14 Beat EPS $0.96 Forecast oand $29.1 Bil Revenue Beat $27.89 Billion Forecast

Earnings

Microsoft Corp. (NASDAQ: MSFT) reported net income of $8.8 billion an increase of 34%, EPS $1.14  beating the estimate $0.96 on revenue of $29.1B beating for revenue of $27.89 billion. Shares of Microsoft have traded in a 52-week range of  $78.01 to $116.18.

Market Reaction > After hours 103.31 −3.07 (2.89%)

Highlights

  • Commercial Cloud revenue at $8.5 billion, up 47 percent year over year beating forecast $8.3 billion in revenue.
  • Azure’s revenue was up 76 percent, slipping from 89 percent growth one quarter ago.
  • Microsoft biggest business segment, More Personal Computing, includes Windows, devices, gaming and search had $10.7 billion in revenue, up 15 percent. This was above the FactSet consensus estimate of $10.18 billion.
  • The Productivity and Business Processes segment, which includes Office, Dynamics and LinkedIn had $9.8 billion in revenue up 19 percent and ahead of the FactSet consensus estimate of $9.39 billion.
  • The company had 32.5 million Office 365 consumer subscribers in the fiscal first quarter, up sequentially from 31.4 million.
  • Microsoft’s Intelligent Cloud segment, containing server products and cloud services (including Azure) along with consulting and support, grew 24 percent with $8.6 billion in revenue. The results exceeded the $8.29 billion FactSet estimate.

During the quarter, the company returned $6.1 billion to shareholders in the form of dividends and share repurchases, representing a 27% increase compared to last year.

Outlook

  • With respect to guidance, analysts are expecting a total of $32.25 billion in revenue for the second quarter of the 2019 fiscal year, implying 11.5 percent growth, according to Refinitiv.

 

Microsoft June Quarter Earnings Recap

Microsoft Corporation NASDAQ: $MSFT

Market Reaction > After hours 108.36 +3.96 (3.79%)

Microsoft Third Quarter Earnings After Wednedsay Close

$1.14 Beat EPS $0.96 Forecast oand $29.1 Bil Revenue Beat $27.89 Billion Forecast

Earnings

Microsoft Corp. (NASDAQ: MSFT) reported net income of $8.8 billion an increase of 34%, EPS $1.14  beating the estimate $0.96 on revenue of $29.1B beating for revenue of $27.89 billion. Shares of Microsoft have traded in a 52-week range of  $78.01 to $116.18.

Market Reaction > After hours $106.06 +3.74 (+3.66%)

Highlights

  • Commercial Cloud revenue at $8.5 billion, up 47 percent year over year beating forecast $8.3 billion in revenue.
  • Azure’s revenue was up 76 percent, slipping from 89 percent growth one quarter ago.
  • Microsoft biggest business segment, More Personal Computing, includes Windows, devices, gaming and search had $10.7 billion in revenue, up 15 percent. This was above the FactSet consensus estimate of $10.18 billion.
  • The Productivity and Business Processes segment, which includes Office, Dynamics and LinkedIn had $9.8 billion in revenue up 19 percent and ahead of the FactSet consensus estimate of $9.39 billion.
  • The company had 32.5 million Office 365 consumer subscribers in the fiscal first quarter, up sequentially from 31.4 million.
  • Microsoft’s Intelligent Cloud segment, containing server products and cloud services (including Azure) along with consulting and support, grew 24 percent with $8.6 billion in revenue. The results exceeded the $8.29 billion FactSet estimate.

During the quarter, the company returned $6.1 billion to shareholders in the form of dividends and share repurchases, representing a 27% increase compared to last year.

Outlook

  • With respect to guidance, analysts are expecting a total of $32.25 billion in revenue for the second quarter of the 2019 fiscal year, implying 11.5 percent growth, according to Refinitiv.

 

Microsoft June Quarter Earnings Recap

Microsoft Corporation NASDAQ: $MSFT

Market Reaction > After hours 108.36 +3.96 (3.79%)

 Microsoft June Quarter Segment Breakdown

Intelligent Cloud Success

Microsoft’s Azure cloud computing platform growth has slowed down over the last few quarters but annually it's still showing just under 90 percent annual growth.  Microsoft's commercial cloud revenue rose 53% year over year to $6.9 billion in the June quarter. Of its three business units, Microsoft's Intelligent Cloud segment was the fastest growing, with revenue up 23% to $9.6 billion. The segment includes server products and Azure cloud services.

  • Revenue increased $1.8 billion or 23%, including a favorable foreign currency impact of 3%.
  • Server products and cloud services revenue increased $1.7 billion or 26%, driven by Azure and server products licensed on-premises revenue growth.
  • Azure revenue increased 89%, due to growth from consumed and SaaS revenue.
  • Server products licensed on-premises revenue increased 8%, mainly due to a higher mix of premium licenses for SQL Server and Windows Server.
  • Enterprise Services revenue increased $118 million or 8%, driven by higher revenue from Premier Support Services and Microsoft Consulting Services, offset in part by a decline in revenue from custom support agreements.
  • Operating income increased $990 million or 34%, including a favorable foreign currency impact of 4%.
  • Gross margin increased $1.3 billion or 23%, driven by growth in server products and cloud services revenue and cloud services scale and efficiencies.
  • Gross margin percentage was relatively unchanged, primarily due to gross margin percentage improvement in Azure, offset in part by an increased mix of cloud offerings. Gross margin included a favorable foreign currency impact of 3%.
  • Operating expenses increased $292 million or 11%, driven by investments in cloud engineering and commercial sales capacity.

"Our early investments in the intelligent cloud and intelligent edge are paying off, and we will continue to expand our reach in large and growing markets with differentiated innovation," Microsoft Chief Executive Satya Nadella said

MSFT Earnings Q2 18 Q4More Personal Computing

The company's More Personal Computing unit saw revenue increase 17% to $10.8 billion. The segment includes Windows software, Surface computers, Xbox video game hardware and software, and internet search advertising.

  • Windows OEM revenue increased 7% (up 7% in constant currency) driven by OEM Pro revenue growth of 14% 
  • Windows commercial products and cloud services revenue increased 23% (up 19% in constant currency) driven by an increased volume of multi-year agreements and the mix of products that carry higher in-quarter revenue recognition
  • Gaming revenue increased 39% (up 38% in constant currency) with Xbox software and services revenue growth of 36% (up 35% in constant currency) mainly from third party title strength

MSFT Earnings Q2 18 GamingMSFT Earnings Q2 18 Gaming Trend

  • Surface revenue increased 25% (up 21% in constant currency) driven by strong performance of the latest editions of Surface against a low prior year comparable
  • Search advertising revenue excluding traffic acquisition costs increased 17% (up 16% in constant currency) driven by higher revenue per search and search volume

Productivity and Business Processes

Microsoft's Productivity and Business Processes unit posted revenue of $9.7 billion, up 13%. The unit includes commercial and consumer Office software, as well as LinkedIn and Dynamics.

  • Office commercial products and cloud services revenue increased 10% (up 8% in constant currency) driven by Office 365 commercial revenue growth of 38% (up 35% in constant currency)
  • Office consumer products and cloud services revenue increased 8% (up 6% in constant currency) and Office 365 consumer subscribers increased to 31.4 million
  • LinkedIn revenue increased 37% (up 34% in constant currency) with continued acceleration in engagement highlighted by LinkedIn sessions growth of 41%
  • Dynamics products and cloud services revenue increased 11% (up 8% in constant currency) driven by Dynamics 365 revenue growth of 61% (up 56% in constant currency)

Guidance

Microsoft did not give guidance for the September quarter, its fiscal Q1, in its earnings press release. 

Source: MSFT Earnings Release, AlphaStreet

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