10-KPeriod: FY2019

MICROSOFT CORP Annual Report, Year Ended Jun 30, 2019

Filed August 1, 2019For Securities:MSFT

Summary

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% 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.

Financial Highlights

54 data points
Beta

Revenue

$125.84B

65.9% Gross Margin

Net Income

$39.24B

31.2% Net Margin

EPS (Diluted)

$5.06

Total Assets

$286.56B

Cash & Equivalents

$11.36B

Free Cash Flow

$38.26B

Financial Statements
Beta
Revenue$125.84B
Cost of Revenue$42.91B
Gross Profit$82.93B
R&D Expenses$16.88B
Operating Income$42.96B
Interest Expense$2.69B
Net Income$39.24B
EPS (Basic)$5.11
EPS (Diluted)$5.06
Shares Outstanding (Basic)7.67B
Shares Outstanding (Diluted)7.75B

Key Highlights

  • 1Revenue increased by 14% year-over-year to $125.8 billion, driven by growth across all segments.
  • 2Commercial cloud revenue, a key strategic focus, grew by an impressive 43% to $38.1 billion.
  • 3Azure revenue saw a significant 72% increase, highlighting the strength of Microsoft's cloud infrastructure.
  • 4The acquisition of GitHub, completed in October 2018, is now integrated into the Intelligent Cloud segment.
  • 5More Personal Computing segment revenue increased by 8%, supported by strong performance in Surface devices (+23%) and Gaming (+10%).
  • 6Diluted earnings per share (EPS) increased by 138% to $5.06, influenced by tax benefits and strong operational performance.
  • 7Microsoft returned $7.7 billion to shareholders in Q4 FY19 through share repurchases and dividends, demonstrating a commitment to shareholder returns.

Frequently Asked Questions

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.

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.

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.

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.