Microsoft Corp. today announced the following results for the quarter ended September 30, 2019, as compared to the corresponding period of last fiscal year:
- Revenue was $33.1 billion and increased 14%
- Operating income was $12.7 billion and increased 27%
- Net income was $10.7 billion and increased 21%
- Diluted earnings per share was $1.38 and increased 21%
“The world’s leading companies are choosing our cloud to build their digital capability,” said Satya Nadella, chief executive officer of Microsoft. “We are accelerating our innovation across the entire tech stack to deliver new value for customers and investing in large and growing markets with expansive opportunity.”
Microsoft returned $7.9 billion to shareholders in the form of dividends and share repurchases in the first quarter of fiscal year 2020, an increase of 28% compared to the first quarter of fiscal year 2019.
“It was a strong start to the fiscal year with our commercial cloud generating $11.6 billion in revenue for the quarter, up 36% year over year,” said Amy Hood, executive vice president and chief financial officer of Microsoft.
Revenue in Productivity and Business Processes was $11.1 billion and increased 13% (up 15% in constant currency), with the following business highlights:
- Office Commercial products and cloud services revenue increased 13% (up 15% in constant currency) driven by Office 365 Commercial revenue growth of 25% (up 28% in constant currency)
- Office Consumer products and cloud services revenue increased 5% (up 6% in constant currency) with continued growth in Office 365 Consumer subscribers to 35.6 million
- LinkedIn revenue increased 25% (up 26% in constant currency)
- Dynamics products and cloud services revenue increased 14% (up 16% in constant currency) driven by Dynamics 365 revenue growth of 41% (up 44% in constant currency)
Revenue in Intelligent Cloud was $10.8 billion and increased 27% (up 29% in constant currency), with the following business highlights:
- Server products and cloud services revenue increased 30% (up 33% in constant currency) driven by Azure revenue growth of 59% (up 63% in constant currency)
- Enterprise Services revenue increased 7% (up 8% in constant currency)
Revenue in More Personal Computing was $11.1 billion and increased 4% (up 5% in constant currency), with the following business highlights:
- Windows OEM revenue increased 9% (up 9% in constant currency)
- Windows Commercial products and cloud services revenue increased 26% (up 29% in constant currency)
- Search advertising revenue excluding traffic acquisition costs increased 11% (up 13% in constant currency)
- Xbox content and services revenue was relatively unchanged (up 1% in constant currency)
- Surface revenue decreased 4% (down 2% in constant currency)
Microsoft will provide forward-looking guidance in connection with this quarterly earnings announcement on its earnings conference call and webcast.
Quarterly Highlights, Product Releases, and Enhancements
Every quarter Microsoft delivers hundreds of products, either as new releases, services, or enhancements to current products and services. These releases are a result of significant research and development investments, made over multiple years, designed to help customers be more productive and secure and to deliver differentiated value across the cloud and the edge.
Here are the major product releases and other highlights for the quarter, organized by product categories, to help illustrate how we are accelerating innovation across our businesses while expanding our market opportunities.
Satya Nadella, chief executive officer, Amy Hood, executive vice president and chief financial officer, Frank Brod, chief accounting officer, Keith Dolliver, deputy general counsel, and Michael Spencer, general manager of investor relations, will host a conference call and webcast at 2:30 p.m. Pacific time (5:30 p.m. Eastern time) today to discuss details of the company’s performance for the quarter and certain forward-looking information. The session may be accessed at https://www.microsoft.com/en-us/investor. The webcast will be available for replay through the close of business on October 23, 2020.
Microsoft presents constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars using the average exchange rates from the comparative period rather than the actual exchange rates in effect during the respective periods. All growth comparisons relate to the corresponding period in the last fiscal year. Microsoft has provided this non-GAAP financial information to aid investors in better understanding our performance. The non-GAAP financial measures presented in this release should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with generally accepted accounting principles (GAAP).
Financial Performance Constant Currency Reconciliation
|Three Months Ended September 30,|
|($ in millions, except per share amounts)||Revenue||Operating Income||Net Income||Diluted Earnings per Share|
|2018 As Reported||$29,084_||$9,955_||$8,824_||$1.14_|
|2019 As Reported||$33,055_||$12,686_||$10,678_||$1.38_|
|Percentage Change Y/Y||14%_||27%_||21%_||21%_|
|Constant Currency Impact||$(507)||$(409)||$(375)||$(0.05)|
|Percentage Change Y/Y Constant Currency||15%_||32%_||25%_||25%_|
Segment Revenue Constant Currency Reconciliation
|Three Months Ended September 30,|
|($ in millions)||Productivity and Business Processes||Intelligent Cloud||More Personal Computing|
|2018 As Reported||$9,771_||$8,567_||$10,746_|
|2019 As Reported||$11,077_||$10,845_||$11,133_|
|Percentage Change Y/Y||13%_||27%_||4%_|
|Constant Currency Impact||$(196)||$(200)||$(111)|
|Percentage Change Y/Y Constant Currency||15%_||29%_||5%_|
Selected Product and Service Revenue Constant Currency Reconciliation
|Three Months Ended September 30, 2019|
|Percentage Change Y/Y (GAAP)||Constant Currency Impact||Percentage Change Y/Y Constant Currency|
|Office commercial products and cloud services||13%||2%||15%|
|Office 365 commercial||25%||3%||28%|
|Office consumer products and cloud services||5%||1%||6%|
|Dynamics products and cloud services||14%||2%||16%|
|Server products and cloud services||30%||3%||33%|
|Windows commercial products and cloud services||26%||3%||29%|
|Search advertising excluding traffic acquisition costs||11%||2%||13%|
|Xbox content and services||0%||1%||1%|
Microsoft (Nasdaq “MSFT” @microsoft) enables digital transformation for the era of an intelligent cloud and an intelligent edge. Its mission is to empower every person and every organization on the planet to achieve more.
Statements in this release that are “forward-looking statements” are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors such as:
- intense competition in all of our markets that may lead to lower revenue or operating margins;
- increasing focus on cloud-based services presenting execution and competitive risks;
- significant investments in products and services that may not achieve expected returns;
- acquisitions, joint ventures, and strategic alliances that may have an adverse effect on our business;
- impairment of goodwill or amortizable intangible assets causing a significant charge to earnings;
- cyberattacks and security vulnerabilities that could lead to reduced revenue, increased costs, liability claims, or harm to our reputation or competitive position;
- disclosure and misuse of personal data that could cause liability and harm to our reputation;
- the possibility that we may not be able to protect information stored in our products and services from use by others;
- abuse of our advertising or social platforms that may harm our reputation or user engagement;
- the development of the internet of things presenting security, privacy, and execution risks;
- issues about the use of artificial intelligence in our offerings that may result in competitive harm, legal liability, or reputational harm; and
- excessive outages, data losses, and disruptions of our online services if we fail to maintain an adequate operations infrastructure;
- quality or supply problems;
- the possibility that we may fail to protect our source code;
- legal changes, our evolving business model, piracy, and other factors may decrease the value of our intellectual property;
- claims that Microsoft has infringed the intellectual property rights of others;
- claims against us that may result in adverse outcomes in legal disputes;
- government litigation and regulatory activity relating to competition rules that may limit how we design and market our products;
- potential liability under trade protection, anti-corruption, and other laws resulting from our global operations;
- laws and regulations relating to the handling of personal data that may impede the adoption of our services or result in increased costs, legal claims, fines, or reputational damage;
- additional tax liabilities;
- damage to our reputation or our brands that may harm our business and operating results.
- exposure to increased economic and operational uncertainties from operating a global business, including the effects of foreign currency exchange;
- adverse economic or market conditions that may harm our business;
- catastrophic events or geo-political conditions that may disrupt our business; and
- the dependence of our business on our ability to attract and retain talented employees.