Microsoft reported net income of $7.4 billion for the quarter ended March 31, 2018 (Q3 FY2018), up 35% from the $5.4 billion reported in the corresponding quarter last year. The company’s total revenues for the quarter stood at $26.8 billion, up 16% from $23.2 billion in Q3 FY2017. The tech giant’s operating income also rose by 20% to $8.2 billion this quarter from around $6.7 billion in Q3 FY2017. The company has shown strong growth across most segments, with its cloud business being a major driving force.
Microsoft reports its results in three segments
- More Personal Computing – This includes Windows, hardware (like the Surface devices), Xbox, as well as search and advertising.
- Productivity and Business Processes – This covers Office, Exchange, SharePoint, Skype, LinkedIn and Dynamics
- Intelligent Cloud – This covers Azure Cloud, Windows Server, SQL Server, Visual Studio, and Enterprise Services
More Personal Computing
More Personal Computing revenue was $9.9 billion, up 13% year-over-year from Q3 FY2017, with operating income of $2.5 billion, up 24%. Windows, gaming, Surface, and search all grew. The Windows results are a bit of a mixed bag though. The Corporate-oriented Windows OEM Pro revenue was up 11% but consumer revenue, however, was down 8%, below the general decline of the PC market, due to a shift to lower-priced products like Chromebooks.
Gaming revenue was up 18% YoY to $2.3 billion, with Xbox software and service revenue gaining 24% YoY. There are 59 million monthly active users of Xbox Live, up 13% from last year. Search revenue was up 16%, excluding traffic acquisition costs, with a mix of higher revenue per search and more searches. Finally, Surface revenue was up by 32% year on year, to $1.1 billion. The Surface line of tablets, notebooks and desktop received a hardware refresh this month.
Productivity and business processes
Revenue in Productivity and Business Processes was $9.0 billion up 17% YoY. The Redmond giant also continues to report numbers from LinkedIn both as part of the Productivity group and independently. Microsoft has now owned jobs and business profile platform giving us a chance to examine year over year results. LinkedIn revenue for the quarter was $1.3 billion, up 37%, with a cost of revenue of $0.4 billion, up 11%, and operating expenses of $1.1 billion, up 19%. This means LinkedIn accrued an operating loss of $0.25 billion, which is 35% lower than the corresponding quarter last year.
Commercial Office 365 revenue was up 42%. This growth came from a 28% increase in users, which has now crossed 135 million per month, combined with higher revenue per user. By contrast, traditional Office product revenue was down 15% percent. This reflects a shift in consumers seeing Office as a service rather than a product and moving towards the subscription model instead of buying a one time license.
Cloud group revenue was $7.9 billion, up 17% year on year, with operating income of $2.7 billion, an increase of 24%. Revenue grew in all three segments: product revenue, cloud revenue, and Enterprise Services. Azure revenue was up 93%, and according to the company’s investor presentation, Azure “premium services” revenue was up by “triple digits” for the 15th quarter in a row. In comparison, Amazon’s cloud platform Amazon Web Services’ net sales stood at $5.44 billion for the quarter and delivered operating income of $1.4 billion. Google, via parent Alphabet, just reported $4.35bn revenue this quarter, a 36% gain, for its Other category, which includes Google Cloud Platform and other businesses. Enterprise Services revenue grew by 8%.