10-KPeriod: FY2021

MICROSOFT CORP Annual Report, Year Ended Jun 30, 2021

Filed July 29, 2021For Securities:MSFT

Summary

Microsoft Corporation's (MSFT) fiscal year 2021 10-K filing reveals a strong performance driven by its cloud offerings and diversified product portfolio. The company reported significant revenue growth across all segments, with Intelligent Cloud, Productivity and Business Processes, and More Personal Computing all contributing positively. This growth was fueled by strong demand for Azure services, Office 365 Commercial, and the gaming segment, bolstered by strategic acquisitions like ZeniMax Media. Financially, Microsoft demonstrated robust growth in revenue, gross margin, operating income, and net income. The company's strategic shift towards cloud-based services continues to yield strong results, evidenced by the substantial increase in commercial cloud revenue. Microsoft also returned significant capital to shareholders through share repurchases and dividends, underscoring its financial health and commitment to shareholder value. The company remains focused on innovation, particularly in AI and cloud computing, while managing operational and cybersecurity risks.

Financial Highlights

54 data points
Beta

Revenue

$168.09B

68.9% Gross Margin

Net Income

$61.27B

36.5% Net Margin

EPS (Diluted)

$8.05

Total Assets

$333.78B

Cash & Equivalents

$14.22B

Free Cash Flow

$56.12B

Financial Statements
Beta
Revenue$168.09B
Cost of Revenue$52.23B
Gross Profit$115.86B
R&D Expenses$20.72B
Operating Income$69.92B
Interest Expense$2.35B
Net Income$61.27B
EPS (Basic)$8.12
EPS (Diluted)$8.05
Shares Outstanding (Basic)7.55B
Shares Outstanding (Diluted)7.61B

Key Highlights

  • 1Revenue increased by 18% to $168.1 billion, demonstrating broad-based growth across all operating segments.
  • 2Commercial cloud revenue surged by 34% to $69.1 billion, highlighting the continued success and strategic importance of Microsoft's cloud services like Azure and Office 365 Commercial.
  • 3Net income grew by a substantial 38% to $61.3 billion, and diluted earnings per share increased by 40% to $8.05, reflecting strong operational performance and profitability.
  • 4The acquisition of ZeniMax Media for $8.1 billion in March 2021 significantly boosted the More Personal Computing segment, particularly within Gaming.
  • 5Microsoft's commitment to shareholder returns is evident, with $10.4 billion returned in the fourth quarter of fiscal year 2021 through share repurchases and dividends.
  • 6The company is actively investing in research and development, with R&D expenses increasing by 8% to $20.7 billion, primarily focused on cloud engineering and AI innovations.
  • 7Microsoft updated its accounting estimate for server and network equipment useful lives, which positively impacted operating income by $2.7 billion and net income by $2.3 billion in fiscal year 2021.

Frequently Asked Questions

Microsoft's revenue growth in fiscal year 2021 was driven by strong performance across all its segments. Key contributors included the Intelligent Cloud segment, primarily fueled by Azure's 50% revenue growth, and the Productivity and Business Processes segment, boosted by Office 365 Commercial growth and LinkedIn's performance. The More Personal Computing segment also saw an increase, largely due to growth in Gaming, particularly Xbox content and services and hardware following new console launches.

Microsoft's commercial cloud business demonstrated exceptional growth, with revenue increasing by 34% to $69.1 billion in fiscal year 2021. This segment, which includes Azure, Office 365 Commercial, Dynamics 365, and the commercial portion of LinkedIn, is a critical component of Microsoft's strategy and a major driver of overall company performance. The continued strong performance in cloud services underscores Microsoft's successful transition to a cloud-first, AI-driven future.

Microsoft returned a total of $10.4 billion to shareholders in the fourth quarter of fiscal year 2021 through a combination of share repurchases and dividends. For the full fiscal year 2021, the company repurchased shares totaling $23.0 billion and paid dividends totaling $16.9 billion. This demonstrates a consistent commitment to returning capital to shareholders, reflecting confidence in its financial stability and future prospects.

Microsoft identified several key risks, including intense competition across all its markets, the rapidly evolving technology landscape, cybersecurity threats, data privacy concerns, and the potential impact of economic downturns or geopolitical instability. Specific risks highlighted include challenges in maintaining platform competitiveness, securing its IT infrastructure and products against cyberattacks, and managing the integration of acquisitions like Nuance Communications. The company also noted potential impacts from ongoing legal and regulatory scrutiny, particularly concerning competition laws.