Microsoft reported net income of $8.9 billion for the quarter ended June 30, 2018 (Q4 FY2018), up 10% from the $8.1 billion reported in the corresponding quarter last year, largely driven by its cloud business for the second straight quarter. Microsoft also attributed strong growth across most segments, including productivity and business processes for the better-than-expected showing. The company’s total revenues for the quarter stood at $30.1 billion, up 17% from $25.6 billion in Q4 FY2017. The tech giant’s operating income surged 35% to $10.4 billion this quarter from around $7.7 billion in Q4 FY2017.

The company also released results for the fiscal year ended June 30, 2018. While revenue rose 14% on year to $110.4 billion operating income was grew 21% YoY to $35.1 billion, Overall, the net come for the financial year stood at $16.6 billion, down 25.5%. It is important to note that during the quarter ending June, the company also agreed to acquire code-sharing website GitHub for $7.5 billion.

Note- The numbers reported here are compliant of the Generally Accepted Accounting Principles (GAAP).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 $10.8 billion, up 17% year-over-year from Q4 FY2017. Windows, gaming, Surface, and search all grew significantly. The company attributed the spike in sales of Windows commercial products to an increase in the volumes of multi-year agreements, while the gaming division’s 39% growth in revenue was on the back of a strong performance noted in Xbox’s software and services division. The company highlighted the strength of third-party titles.

Search advertising revenue (minus the traffic acquisition costs) also increased 17%, owing to higher revenue per search and search volumes. Finally, Surface revenue surged 25% year on year driven by the sales of new products. Weak sales in the corresponding quarter a year ago also helped the growth.

Productivity and business processes

Revenue in Productivity and Business Processes was $9.7 billion up 13% YoY. The Redmond giant also continues to report numbers from LinkedIn both as part of the Productivity group and independently. LinkedIn revenue for the quarter was $1.5 billion, up 37%.

Office commercial products and cloud services revenue increased 10% driven by a 38% increase in revenue of Commercial Office 365. On the other hand, Office consumer products and cloud services revenue increased 8% as the consumer subscribers of Office 365 increased to 31.4 million. Dynamics products and cloud services revenue increased 11% as Dynamics 365 revenue registered a staggering growth of 61%

Intelligent Cloud

Cloud group revenue was $9.6 billion, up 23% year on year comfortably beating a FactSet analyst consensus of $9.09 billion. Revenue grew in all three segments: product revenue, cloud revenue, and Enterprise Services. Azure revenue, although grew sharply at 89% YoY, it fell from the 93% growth recorded in the previous quarter. While Microsoft did not disclose exact revenue from Azure, KeyBanc analysts had estimated that Azure on its own would yield $2.05 billion of the Commercial Cloud revenue, CNBC reported. In comparison, however, Market-share surveys show Azure lagging far behind Amazon, which is at least three times bigger by that measure, Bloomberg reported. Amazon’s cloud platform Amazon Web Services’ net sales stood at $5.44 billion in the previous quarter.

Financials:

– Microsoft reported overall revenues of $30.1 billion during Q4 FY18, up 17% YoY from $25.6 billion in the same quarter last year (Q4 FY17).

– Net Income for the quarter stood at $8.9 billion, up 10% YoY from $8.01 billion from the corresponding quarter last year.

–Operating income for the quarter surged 35% to $10.4 billion from around $7.7 billion in Q4 FY2017

– Productivity and Business segment accounted for revenues of $9.7 billion for the quarter, up 13% YoY from $8.55 billion.

– Intelligent Cloud business posted revenues of $9.6 billion during Q4FY18, up 23% from $7.8 billion in the same quarter last year.

–  More Personal Computing segment revenues were $10.8 billion for the quarter, up 17% from $9.23 billion.

Below are some comments made by Microsoft officials during the earnings conference call

On Azure

Microsoft CEO Satya Nadella said, “We are investing aggressively to build Azure as the world’s computer..We expanded our global datacenter footprint to 54 regions – more than any other cloud provider – and with the most comprehensive compliance coverage in the industry. We added nearly 500 new Azure capabilities in the last year alone focused on both existing workloads and new workloads such as IoT and Edge AI. We introduced Azure Stack and Azure Sphere – two first-of-their kind cloud-to-edge solutions – that are already seeing strong customer demand. The world’s leading companies are running on Azure, and I’m especially proud that Walmart chose Azure and Microsoft 365 to accelerate its digital transformation for their associates and customers.”

On Office 365

“Microsoft 365 is now a multi-billion-dollar business that gives our customers a path to the cloud and broadens our reach with new and under-penetrated markets, including more than 2 billion first-line workers, and industry-specific workflows. We have more than 135 million users of Office 365 commercial. Outlook mobile is being used on more than 100 million iOS and Android devices. And more than 200 thousand organizations are using Microsoft Teams as the hub for teamwork,” Nadella added.

On LinkedIn

“It was a record year for LinkedIn – now with more than 575 million members and revenue growth of 37 percent in Q4 – the fifth consecutive quarter of revenue acceleration. We saw record levels of engagement and job postings again this quarter, with sessions growth up 41 percent year-over-year. This strong engagement is driven by the Any quality of the feed, video, messaging and the acceleration of mobile usage – with mobile sessions up more than 55 percent year-over-year,” Nadella said.

On Gaming and Xbox

“We are investing aggressively in content, community and cloud services across every endpoint to expand usage and deepen engagement with gamers. The combination of Xbox Live, Game Pass subscriptions and Mixer are driving record levels of growth and engagement,” said the CEO of Microsoft.

Download: Financials | Transcript | Press Release | Investor Presentation