01—Abstract
Summary
Summary of the 10-K filed August 1, 2019. Cited figures are marked; the original filing is the authoritative source.
Microsoft Corporation's (MSFT) 2019 10-K filing showcases a year of robust growth, driven by its strategic focus on the intelligent cloud and intelligent edge.
The company reported significant increases in revenue, gross margin, and operating income, reflecting strong performance across all three of its reporting segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. Key growth drivers included a substantial 43%a surge in commercial cloud revenue, powered by Azure and Office 365 Commercial. The acquisition of GitHub further bolstered the Intelligent Cloud segment.
The company also saw healthy growth in its More Personal Computing segment, with strong performance from Surface devices and Xbox gaming. Microsoft continues to invest heavily in research and development, particularly in cloud and AI, positioning itself for future innovation and sustained growth in an evolving technology landscape.
02—Key points
Key Highlights
- Revenue increased by 14% year-over-year to $125.8 billion, driven by growth across all segments.
- Commercial cloud revenue, a key strategic focus, grew by an impressive 43% to $38.1 billion.
- Azure revenue saw a significant 72% increase, highlighting the strength of Microsoft's cloud infrastructure.
- The acquisition of GitHub, completed in October 2018, is now integrated into the Intelligent Cloud segment.
- More Personal Computing segment revenue increased by 8%, supported by strong performance in Surface devices (+23%) and Gaming (+10%).
- Diluted earnings per share (EPS) increased by 138% to $5.06, influenced by tax benefits and strong operational performance.
- Microsoft returned $7.7 billion to shareholders in Q4 FY19 through share repurchases and dividends, demonstrating a commitment to shareholder returns.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Microsoft Corp kept $0.31.
- Revenue$125.84B100.0%
- Cost of revenue−$42.91B34.1%
- Gross profit$82.93B65.9%
- Operating costs−$39.97B31.8%
- Operating income$42.96B34.1%
- Interest, other & tax−$3.72B3.0%
- Net income$39.24B31.2%
Where FY2019 revenue went
$125.84B- Cost of revenue: $42.91B, 34% of revenue
- Net income: $39.24B, 31% of revenue
- Other operating costs: $23.10B, 18% of revenue
- R&D: $16.88B, 13% of revenue
- Interest, other & tax: $3.72B, 3.0% of revenue
Kept 31% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed August 1, 2019Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $125.84B$110.36B | +14.0% |
| Cost of Revenue | $42.91B$38.35B | +11.9% |
| Gross Profit | $82.93B$72.01B | +15.2% |
| R&D Expenses | $16.88B$14.73B | +14.6% |
| Operating Income | $42.96B$35.06B | +22.5% |
| Interest Expense | $2.69B$2.73B | −1.7% |
| Net Income | $39.24B$16.57B | +136.8% |
| EPS (Basic) | $5.11$2.15 | +137.7% |
| EPS (Diluted) | $5.06$2.13 | +137.6% |
| Shares Outstanding (Basic) | 7.67B7.70B | −0.4% |
| Shares Outstanding (Diluted) | 7.75B7.79B | −0.5% |
05—Questions
Frequently Asked Questions
What were the main drivers of Microsoft's revenue growth in fiscal year 2019?
Microsoft's revenue growth in fiscal year 2019 was primarily driven by strong performance across all its segments. Key contributors included the 'Intelligent Cloud' segment, propelled by a 72% increase in Azure revenue and growth in server products, and the 'Productivity and Business Processes' segment, boosted by Office 365 Commercial and LinkedIn. The 'More Personal Computing' segment also saw growth, fueled by increased sales of Surface devices and strong performance in Gaming.
How did the acquisitions of LinkedIn and GitHub impact the financial results?
The acquisition of LinkedIn, completed in late 2016, continued to show significant growth in FY19, with revenue increasing by 28%. The acquisition of GitHub, completed in October 2018, was integrated into the Intelligent Cloud segment and contributed to the segment's overall revenue growth of 21%. These acquisitions align with Microsoft's strategy to strengthen its cloud and enterprise offerings.
What is the outlook for Microsoft's cloud business, particularly Azure?
Microsoft's cloud business, especially Azure, is a major growth engine. In FY19, commercial cloud revenue grew 43%, and Azure specifically saw a 72% increase in revenue. The company is heavily investing in cloud and AI engineering, indicating a strong commitment to expanding its cloud services and capturing further market share in this rapidly growing sector.
How did the Tax Cuts and Jobs Act (TCJA) affect Microsoft's financial results?
The TCJA had a significant impact, with a net charge of $13.7 billion recorded in FY18. However, in FY19, Microsoft recorded a $2.6 billion net income tax benefit related to intangible property transfers. These tax impacts, especially the benefit in FY19, significantly influenced the reported net income and diluted earnings per share for both years.
06—Continue