Microsoft Cloud Strength Highlights First Quarter Results

Commercial cloud annualized revenue run rate exceeds $13.0 billion

Microsoft today announced the following results for the quarter ended September 30, 2016:

  • Revenue was $20.5 billion GAAP, and $22.3 billion non-GAAP
  • Operating income was $5.2 billion GAAP, and $7.1 billion non-GAAP
  • Net income was $4.7 billion GAAP, and $6.0 billion non-GAAP
  • Diluted earnings per share was $0.60 GAAP, and $0.76 non-GAAP

Satya Nadella, chief executive officer at Microsoft said,

“We are helping to lead a profound digital transformation for customers, infusing intelligence across all of our platforms and experiences,”

“We continue to innovate, grow engagement, and build our total addressable market.”

The following table reconciles financial results reported in accordance with generally accepted accounting principles (“GAAP”) to non-GAAP financial results. Microsoft has provided this non-GAAP financial information to aid investors in better understanding the company’s performance.

Additional information regarding non-GAAP definition is provided below. All growth comparisons relate to the corresponding period in the last fiscal year.
[table style=”table-striped”]

 

Three Months Ended September 30,

 ($ in millions, except per share amounts)

Revenue

Operating Income

Net Income

Diluted Earnings per Share

2015 As Reported (GAAP)

$20,379

$5,793

$4,902

$0.61

  Net Impact from Windows 10 Revenue Deferrals

1,281

1,281

759

0.09

2015 As Adjusted (non-GAAP)

$21,660

$7,074

$5,661

$0.70

2016 As Reported (GAAP)

$20,453

$5,225

$4,690

$0.60

  Net Impact from Windows 10 Revenue Deferrals

1,881

1,881

1,299

0.16

2016 As Adjusted (non-GAAP)

$22,334

$7,106

$5,989

$0.76

Percentage Change Y/Y (GAAP)

0%

(10)%

(4)%

(2)%

Percentage Change Y/Y (non-GAAP)

3%

0%

6%

9%

Percentage Change Y/Y (non-GAAP) Constant Currency

5%

4%

10%

13%

[/table]
Microsoft returned $6.6 billion to shareholders in the form of share repurchases and dividends in the first quarter of fiscal year 2017. During the quarter, the company announced an 8% increase in its quarterly dividend to $0.39 per share, a new share repurchase program authorizing up to $40 billion in share repurchases, and reaffirmed it is on track to complete its current $40 billion share repurchase program by December 31, 2016.

“Our first quarter results showed continued demand for our cloud-based services,” said Amy Hood, executive vice president and chief financial officer at Microsoft.

“We continue to invest, position ourselves for long-term growth, and execute well across our businesses.”

Revenue in Productivity and Business Processes grew 6% (up 8% in constant currency) to $6.7 billion, with the following business highlights:

  • Office commercial products and cloud services revenue grew 5% (up 8% in constant currency) driven by Office 365 commercial revenue growth of 51% (up 54% in constant currency)
  • Office consumer products and cloud services revenue grew 8% (up 8% in constant currency) and Office 365 consumer subscribers increased to 24.0 million
  • Dynamics products and cloud services revenue grew 11% (up 13% in constant currency) driven by Dynamics online revenue growth

Revenue in Intelligent Cloud grew 8% (up 10% in constant currency) to $6.4 billion, with the following business highlights:

  • Server products and cloud services revenue increased 11% (up 13% in constant currency) driven by double-digit annuity revenue growth
  • Azure revenue grew 116% (up 121% in constant currency) with Azure compute usage more than doubling year-over-year
  • Enterprise Services revenue increased 1% (up 2% in constant currency) with growth in Premier Support Services and consulting offset by declines in custom support agreements

Revenue in More Personal Computing declined 2% (down 1% in constant currency) to $9.3 billion, with the following business highlights:

  • Windows OEM revenue was flat year-over-year (flat in constant currency), slightly ahead of the PC market
  • Windows commercial products and cloud services revenue was flat year-over-year (up 2% in constant currency) driven by annuity revenue
  • Phone revenue declined 72% (down 71% in constant currency)
  • Gaming revenue declined 5% (down 4% in constant currency) driven by lower Xbox console revenue offset by higher Xbox software and services revenue
  • Search advertising revenue excluding traffic acquisition costs grew 9% (up 10% in constant currency) driven by increased revenue per search and search volume

Acquisitions and Divestitures
Microsoft expects to close the acquisition of LinkedIn and the sale of entry-level feature phone business in the second quarter of fiscal year 2017, subject to regulatory approvals and other closing conditions.

Business Outlook
Microsoft will provide forward-looking guidance in connection with this quarterly earnings announcement on its earnings conference call and webcast.

Webcast Details

Satya Nadella, chief executive officer, Amy Hood, executive vice president and chief financial officer, Frank Brod, chief accounting officer, John Seethoff, deputy general counsel and corporate secretary, and Chris Suh, 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 http://www.microsoft.com/en-us/investor. The webcast will be available for replay through the close of business on October 20, 2017.

            Financial Performance Constant Currency Reconciliation
[table style=”table-striped”]

 

Three Months Ended September 30,

 ($ in millions, except per share amounts)

Revenue

Operating Income

Net Income

Diluted Earnings per Share

2015 As Reported (GAAP)

$20,379

$5,793

$4,902

$0.61

2015 As Adjusted (non-GAAP)

$21,660

$7,074

$5,661

$0.70

2016 As Reported (GAAP)

$20,453

$5,225

$4,690

$0.60

2016 As Adjusted (non-GAAP)

$22,334

$7,106

$5,989

$0.76

Percentage Change Y/Y (GAAP)

0%

(10)%

(4)%

(2)%

Percentage Change Y/Y (non-GAAP)

3%

0%

6%

9%

Constant Currency Impact

$(341)

$(256)

$(209)

$(0.03)

Percentage Change Y/Y (non-GAAP) Constant Currency

5%

4%

10%

13%

[/table

<tbody “>

 

Three Months Ended September 30,

 ($ in millions)

Productivity and Business Processes

Intelligent Cloud

More Personal Computing

2015 As Reported (GAAP)

$6,306

$5,892

$9,462

2016 As Reported (GAAP)

$6,658

$6,382

$9,294

Percentage Change Y/Y (GAAP)

6%

8%

(2)%

Constant Currency Impact

$(125)

$(119)

$(97)

Percentage Change Y/Y (non-GAAP) Constant Currency

8%

10%

(1)%

[/table]
 

 Selected Product and Service Revenue Constant Currency Reconciliation
[table style=”table-striped”]

 

Three Months Ended September 30,

Percentage Change Y/Y (GAAP)

Constant Currency Impact

Percentage Change Y/Y (non-GAAP) Constant Currency

Office commercial products and cloud services

5%

3%

8%

Office 365 commercial

51%

3%

54%

Office consumer products and cloud services

8%

0%

8%

Dynamics products and cloud services

11%

2%

13%

Server products and cloud services

11%

2%

13%

Azure

116%

5%

121%

Enterprise Services

1%

1%

2%

Windows OEM

0%

0%

0%

Windows commercial products and cloud services

0%

2%

2%

Phone

(72)%

1%

(71)%

Gaming

(5)%

1%

(4)%

Search advertising excluding traffic acquisition costs

9%

1%

10%

[/table]

Rapid Mobile

Rapid Mobile uses cookies, tokens, and other third party scripts to recognise visitors of our sites and services, remember your settings and privacy choices, and - depending on your settings and privacy choices - enable us and some key partners to collect information about you so that we can improve our services and deliver relevant ads.

 

By continuing to use our site or clicking I Accept, you agree that Rapid Mobile and our key partners may collect data and use cookies for personalised ads and other purposes, as described more fully in our privacy policy.

 

You can change your settings at any time by clicking Manage Settings or by visiting our Privacy Centre for more detailed information.

 

Privacy Settings saved!
Cookie Services

When you visit any website, it may store or retrieve information on your browser, mostly in the form of cookies. Because we respect your right to privacy, you can choose not to allow some types of cookies. Click on the different category headings to find out more and change our default settings. However, blocking some types of cookies may impact your experience of the site and the services we are able to offer.

These cookies allow us to count visits and traffic sources, so we can measure and improve the performance of our site.

We track anonymized user information to improve our website.
  • _ga
  • _gid
  • _gat

Decline all Services
Accept all Services