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]
