Microsoft reports $33.7 bn in Q4 2019 revenue

9,057

Microsoft today reported earnings for its fourth fiscal quarter of 2019, including revenue of $33.7 billion, net income of $13.2 billion, and earnings per share of $1.71 (compared to revenue of $30.1 billion, net income of $8.9 billion, and earnings per share of $1.14 in Q4 2018). All three of the company’s operating groups saw year-over-year growth.

Diluted earnings per share was $1.71 GAAP and $1.37 non-GAAP, and increased 50% and 21%, respectively, GAAP results include a $2.6 billion net income tax benefit explained in the Non-GAAP Definition section below

“It was a record fiscal year for Microsoft, a result of our deep partnerships with leading companies in every industry,” said Satya Nadella, chief executive officer of Microsoft.

“Every day we work alongside our customers to help them build their own digital capability – innovating with them, creating new businesses with them, and earning their trust. This commitment to our customers’ success is resulting in larger, multi-year commercial cloud agreements and growing momentum across every layer of our technology stack.”

The following table reconciles financial results reported in accordance with generally accepted accounting principles (GAAP) to non-GAAP financial results. Additional information regarding non-GAAP definition is provided below. All growth comparisons relate to the corresponding period in the last fiscal year.

Three Months Ended June 30,
 ($ in millions, except per share amounts) Revenue Operating Income Net Income Diluted Earnings per Share
2018 As Reported (GAAP) $30,085 $10,379 $8,873_ $1.14_
  Net Impact of the Tax Cuts and Jobs Act (TCJA) (104) (0.01)
2018 As Adjusted (non-GAAP) $30,085 $10,379 $8,769_ $1.13_
2019 As Reported (GAAP) $33,717 $12,405 $13,187_ $1.71_
  Net Tax Impact of Transfer of Intangible Properties (2,567) (0.34)
2019 As Adjusted (non-GAAP) $33,717 $12,405 $10,620_ $1.37_
Percentage Change Y/Y (GAAP) 12% 20% 49% 50%
Percentage Change Y/Y (non-GAAP) 12% 20% 21% 21%
Percentage Change Y/Y (non-GAAP) Constant Currency 14% 24% 24% 24%

The current quarter effective tax rate was (5)% and 16% on a GAAP and non-GAAP basis, respectively. GAAP results include a net income tax benefit of $2.6 billion for the fourth quarter of fiscal year 2019 and a net income tax benefit of $104 million for the fourth quarter of fiscal year 2018. These net tax benefits are excluded from non-GAAP results and explained in the Non-GAAP Definition section below.

 
microsoft reports $33.7 bn in q4 2019 revenue - Office365 - Microsoft reports $33.7 bn in Q4 2019 revenue

Microsoft returned $7.7 billion to shareholders in the form of share repurchases and dividends in the fourth quarter of fiscal year 2019.

“Q4 commercial cloud revenue increased 39% year-over-year to $11.0 billion, driving our strongest commercial quarter ever,” said Amy Hood, executive vice president and chief financial officer of Microsoft.

Revenue in Productivity and Business Processes was $11.0 billion and increased 14% (up 17% in constant currency), with the following business highlights:

 
microsoft reports $33.7 bn in q4 2019 revenue - coinbase - Microsoft reports $33.7 bn in Q4 2019 revenue
  • Office Commercial products and cloud services revenue increased 14% (up 16% in constant currency) driven by Office 365 Commercial revenue growth of 31% (up 34% in constant currency)
  • Office Consumer products and cloud services revenue increased 6% (up 8% in constant currency) and Office 365 Consumer subscribers increased to 34.8 million
  • LinkedIn revenue increased 25% (up 28% in constant currency) with record levels of engagement highlighted by LinkedIn sessions growth of 22%
  • Dynamics products and cloud services revenue increased 12% (up 15% in constant currency) driven by Dynamics 365 revenue growth of 45% (up 48% in constant currency)

Revenue in Intelligent Cloud was $11.4 billion and increased 19% (up 21% in constant currency), with the following business highlights:

  • Server products and cloud services revenue increased 22% (up 24% in constant currency) driven by Azure revenue growth of 64% (up 68% in constant currency)
  • Enterprise Services revenue increased 4% (up 6% in constant currency)

Revenue in More Personal Computing was $11.3 billion and increased 4% (up 6% 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 13% (up 16% in constant currency)
  • Surface revenue increased 14% (up 17% in constant currency)
  • Search advertising revenue excluding traffic acquisition costs increased 9% (up 10% in constant currency)
  • Gaming revenue declined 10% (down 8% in constant currency) with Xbox software and services revenue down 3% (down 1% in constant currency)

 

microsoft reports $33.7 bn in q4 2019 revenue - 90629 - Microsoft reports $33.7 bn in Q4 2019 revenue
Twelve Months Ended June 30,
 ($ in millions, except per share amounts) Revenue Operating Income Net Income Diluted Earnings per Share
2018 As Reported (GAAP) $110,360 $35,058 $16,571_ $2.13_
  Net Impact of the TCJA 13,696_ 1.75_
2018 As Adjusted (non-GAAP) $110,360 $35,058 $30,267_ $3.88_
2019 As Reported (GAAP) $125,843 $42,959 $39,240_ $5.06_
  Net Tax Impact of Transfer of Intangible Properties (2,567) (0.33)
  Net Impact of the TCJA 157_ 0.02_
2019 As Adjusted (non-GAAP) $125,843 $42,959 $36,830_ $4.75_
Percentage Change Y/Y (GAAP) 14% 23% 137% 138%
Percentage Change Y/Y (non-GAAP) 14% 23% 22% 22%
Percentage Change Y/Y (non-GAAP) Constant Currency 15% 24% 22% 23%

The current year effective tax rate was 10% and 16% on a GAAP and non-GAAP basis, respectively. GAAP results include a net income tax benefit of $2.6 billion and a net income tax charge of $157 million for the twelve months ended June 30, 2019. GAAP results include a net income tax charge of $13.7 billion for the twelve months ended June 30, 2018. These net tax impacts are excluded from our non-GAAP results and explained in the Non-GAAP Definition section below.

Business Outlook

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

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 http://www.microsoft.com/en-us/investor. The webcast will be available for replay through the close of business on July 18, 2020.

Financial Performance Constant Currency Reconciliation

 
microsoft reports $33.7 bn in q4 2019 revenue - RapidGator - Microsoft reports $33.7 bn in Q4 2019 revenue
Three Months Ended June 30,
 ($ in millions, except per share amounts) Revenue Operating Income Net Income Diluted Earnings per Share
2018 As Reported (GAAP) $30,085_ $10,379_ $8,873_ $1.14_
2018 As Adjusted (non-GAAP) $30,085_ $10,379_ $8,769_ $1.13_
2019 As Reported $33,717_ $12,405_ $13,187_ $1.71_
2019 As Adjusted (non-GAAP) $33,717_ $12,405_ $10,620_ $1.37_
Percentage Change Y/Y (GAAP) 12%_ 20%_ 49%_ 50%_
Percentage Change Y/Y (non-GAAP) 12%_ 20%_ 21%_ 21%_
Constant Currency Impact $(639) $(444) $(250) $(0.03)
Percentage Change Y/Y (non-GAAP) Constant Currency 14%_ 24%_ 24%_ 24%_

 

 

 

 

 

Twelve Months Ended June 30,

 ($ in millions, except per share amounts) Revenue Operating Income Net Income Diluted Earnings per Share
2018 As Reported (GAAP) $110,360_ $35,058_ $16,571_ $2.13_
2018 As Adjusted (non-GAAP) $110,360_ $35,058_ $30,267_ $3.88_
2019 As Reported $125,843_ $42,959_ $39,240_ $5.06_
2019 As Adjusted (non-GAAP) $125,843_ $42,959_ $36,830_ $4.75_
Percentage Change Y/Y (GAAP) 14%_ 23%_ 137%_ 138%_
Percentage Change Y/Y (non-GAAP) 14%_ 23%_ 22%_ 22%_
Constant Currency Impact $(1,116) $(505) $(147) $(0.02)
Percentage Change Y/Y (non-GAAP) Constant Currency 15%_ 24%_  22%_ 23%_

 

Segment Revenue Constant Currency Reconciliation

microsoft reports $33.7 bn in q4 2019 revenue - 90629 - Microsoft reports $33.7 bn in Q4 2019 revenue
Three Months Ended June 30,
 ($ in millions) Productivity and Business Processes Intelligent Cloud More Personal Computing
2018 As Reported $9,668_ $9,606_ $10,811_
2019 As Reported $11,047_ $11,391_ $11,279_
Percentage Change Y/Y 14%_ 19%_ 4%_
Constant Currency Impact $(249) $(229) $(161)
Percentage Change Y/Y Constant Currency 17%_ 21%_ 6%_

 

 Selected Product and Service Revenue Constant Currency Reconciliation           

Three Months Ended June 30, 2019
Percentage Change Y/Y (GAAP) Constant Currency Impact Percentage Change Y/Y Constant Currency
Office Commercial products and cloud services 14% 2% 16%
Office 365 Commercial 31% 3% 34%
Office Consumer products and cloud services 6% 2% 8%
LinkedIn 25% 3% 28%
Dynamics products and cloud services 12% 3% 15%
Dynamics 365 45% 3% 48%
Server products and cloud services 22% 2% 24%
Azure 64% 4% 68%
Enterprise Services 4% 2% 6%
Windows OEM 9% 0% 9%
Windows Commercial products and cloud services 13% 3% 16%
Search advertising excluding traffic acquisition costs 9% 1% 10%
Surface 14% 3% 17%
Gaming (10)% 2% (8)%
Xbox software and services (3)% 2% (1)%

 

MICROSOFT CORPORATION INCOME STATEMENTS (In millions, except per share amounts) (Unaudited)

Three Months Ended

 June 30,

Twelve Months Ended
 
microsoft reports $33.7 bn in q4 2019 revenue - amzbiz 50 - Microsoft reports $33.7 bn in Q4 2019 revenue

 June 30,

  2019   2018   2019   2018
Revenue:
Product  $17,103  $17,159  $66,069  $64,497
Service and other 16,614  12,926 59,774  45,863
Total revenue  33,717  30,085  125,843  110,360
Cost of revenue:
Product  3,298  3,517  16,273  15,420
Service and other  7,114  6,225  26,637  22,933
Total cost of revenue 10,412  9,742  42,910  38,353
Gross margin  23,305  20,343  82,933  72,007
Research and development  4,513  3,933  16,876  14,726
Sales and marketing 4,962  4,760  18,213  17,469
General and administrative 1,425  1,271  4,885  4,754
Operating income 12,405  10,379  42,959  35,058
Other income, net 191  301  729  1,416
Income before income taxes 12,596  10,680  43,688  36,474
Provision for (benefit from) income taxes (591)  1,807  4,448  19,903
Net income  $13,187  $8,873  $39,240  $16,571
Earnings per share:
Basic  $1.72  $1.15  $5.11  $2.15
Diluted  $1.71  $1.14  $5.06  $2.13
Weighted average shares outstanding:
Basic 7,655 7,683 7,673 7,700
Diluted 7,730 7,775 7,753 7,794

 

COMPREHENSIVE INCOME STATEMENTS (In millions) (Unaudited)

Three Months Ended

 June 30,

Twelve Months Ended

 June 30,

  2019   2018   2019   2018
Net income $13,187  $8,873  $39,240  $16,571
Other comprehensive income (loss), net of tax:
Net change related to derivatives (80) 145 (173) 39
Net change related to investments 1,071 (535) 2,405 (2,717)
Translation adjustments and other (66) (686) (318) (178)
Other comprehensive income (loss) 925 (1,076) 1,914 (2,856)
Comprehensive income $14,112  $7,797  $41,154  $13,715

 

BALANCE SHEETS (In millions) (Unaudited)

microsoft reports $33.7 bn in q4 2019 revenue - 90629 - Microsoft reports $33.7 bn in Q4 2019 revenue
  June 30,

2019

  June 30,

 2018

Assets
Current assets:
Cash and cash equivalents  $11,356  $11,946
Short-term investments  122,463  121,822
Total cash, cash equivalents, and short-term investments  133,819  133,768
Accounts receivable, net of allowance for doubtful accounts of $411 and $377  29,524  26,481
Inventories  2,063  2,662
Other  10,146  6,751
Total current assets  175,552  169,662
Property and equipment, net of accumulated depreciation of $35,330 and $29,223  36,477  29,460
Operating lease right-of-use assets  7,379  6,686
Equity and other investments  2,649  1,862
Goodwill 42,026  35,683
Intangible assets, net  7,750  8,053
Other long-term assets  14,723  7,442
Total assets  $286,556  $258,848
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable  $9,382  $8,617
Current portion of long-term debt  5,516  3,998
Accrued compensation  6,830  6,103
Short-term income taxes  5,665  2,121
Short-term unearned revenue 32,676  28,905
Other 9,351  8,744
Total current liabilities 69,420  58,488
Long-term debt  66,662  72,242
Long-term income taxes 29,612  30,265
Long-term unearned revenue  4,530  3,815
Deferred income taxes  233  541
Operating lease liabilities  6,188  5,568
Other long-term liabilities 7,581    5,211
Total liabilities 184,226  176,130
Commitments and contingencies
Stockholders’ equity:
 Common stock and paid-in capital — shares authorized 24,000; outstanding 7,643 and 7,677 78,520  71,223
Retained earnings  24,150  13,682
Accumulated other comprehensive loss  (340)  (2,187)
Total stockholders’ equity  102,330  82,718
Total liabilities and stockholders’ equity  $286,556  $258,848

 

CASH FLOWS STATEMENTS (In millions) (Unaudited)

Three Months Ended

 June 30,

Twelve Months Ended
 
microsoft reports $33.7 bn in q4 2019 revenue - F Secure - Microsoft reports $33.7 bn in Q4 2019 revenue

 June 30,

  2019   2018   2019   2018
Operations
Net income $13,187  $8,873 $39,240  $16,571
Adjustments to reconcile net income to net cash from operations:
Depreciation, amortization, and other 2,924 2,516 11,682 10,261
Stock-based compensation expense 1,190 1,012 4,652 3,940
Net recognized gains on investments and derivatives (322) (567) (792) (2,212)
Deferred income taxes (5,723) (2,389) (6,463) (5,143)
Changes in operating assets and liabilities:
Accounts receivable (10,070) (9,188) (2,812) (3,862)
Inventories (113) (572) 597 (465)
Other current assets (854) (839) (1,718) (952)
Other long-term assets (865) 550 (1,834) (285)
Accounts payable 1,264 1,010 232 1,148
Unearned revenue 9,005 8,702 4,462 5,922
Income taxes 3,808 903 2,929 18,183
Other current liabilities 2,436 1,773 1,419 798
Other long-term liabilities 241 (366) 591 (20)
Net cash from operations 16,108 11,418 52,185 43,884
Financing  
Repayments of short-term debt, maturities of 90 days or less, net 0 0 0 (7,324)
Proceeds from issuance of debt 0 0 0 7,183
Repayments of debt (1,000) (681) (4,000) (10,060)
Common stock issued 308 255 1,142 1,002
Common stock repurchased (4,633) (2,362) (19,543) (10,721)
Common stock cash dividends paid (3,521) (3,226) (13,811) (12,699)
Other, net 160 (25) (675) (971)
Net cash used in financing (8,686) (6,039) (36,887) (33,590)
Investing  
Additions to property and equipment (4,051) (3,980) (13,925) (11,632)
Acquisition of companies, net of cash acquired, and purchases of intangible and other assets (281) (434) (2,388) (888)
Purchases of investments (15,442) (32,380) (57,697) (137,380)
Maturities of investments 5,154 7,108 20,043 26,360
Sales of investments 7,363 27,024 38,194 117,577
Securities lending payable 0 (8) 0 (98)
Net cash used in investing (7,257) (2,670) (15,773) (6,061)
Effect of foreign exchange rates on cash and cash equivalents (21) 16 (115) 50
Net change in cash and cash equivalents 144 2,725 (590) 4,283
Cash and cash equivalents, beginning of period 11,212 9,221 11,946 7,663
Cash and cash equivalents, end of period $11,356  $11,946 $11,356  $11,946

 

SEGMENT REVENUE AND OPERATING INCOME (In millions)(Unaudited)

  Three Months Ended

 June 30,

  Twelve Months Ended

 June 30,

   
  2019   2018   2019   2018
Revenue        
Productivity and Business Processes $11,047    $9,668  $41,160    $35,865
Intelligent Cloud 11,391   9,606 38,985   32,219
More Personal Computing 11,279   10,811 45,698   42,276
Total $33,717   $30,085 $125,843   $110,360
Operating Income        
Productivity and Business Processes  $4,344    $3,466  $16,219    $12,924
Intelligent Cloud 4,502   3,901 13,920   11,524
More Personal Computing 3,559   3,012 12,820   10,610
Total $12,405   $10,379  $42,959   $35,058

 

 

 
microsoft reports $33.7 bn in q4 2019 revenue - RapidGator - Microsoft reports $33.7 bn in Q4 2019 revenue

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