Summary
Microsoft Corporation's (MSFT) 10-Q filing for the period ending March 30, 2014, reveals a stable top line with revenue largely flat year-over-year for the third quarter, totaling $20.4 billion. However, a significant increase in the cost of revenue, particularly related to higher volumes of Xbox and Surface sales and increased datacenter expenses, led to a decrease in operating income by 8% to $6.97 billion. Diluted earnings per share also saw a decline of 6% to $0.68. For the nine-month period, revenue grew by 9% to $63.45 billion, with operating income increasing by 3% to $21.28 billion, and diluted EPS rising by 5% to $2.08. The company highlighted strong growth in its Cloud Services revenue, which doubled, and substantial increases in its Devices and Consumer Hardware segment, driven by new product launches like Xbox One and Surface. The balance sheet shows a substantial increase in cash, cash equivalents, and short-term investments, reaching $88.4 billion. The company also managed its debt effectively, with long-term debt increasing to $22.7 billion, largely due to strategic issuances in late 2013. Microsoft continued its commitment to returning capital to shareholders through share repurchases totaling $1.8 billion in the quarter and $5.3 billion year-to-date, alongside consistent dividend payments. The company is on track to close the significant acquisition of Nokia's Devices and Services business on April 25, 2014, which is expected to further shape its devices and services strategy.
Financial Highlights
54 data points| Revenue | $20.40B |
| Cost of Revenue | $5.98B |
| Gross Profit | $14.43B |
| R&D Expenses | $2.74B |
| Operating Expenses | $7.45B |
| Operating Income | $6.97B |
| Interest Expense | $175.00M |
| Net Income | $5.66B |
| EPS (Basic) | $0.68 |
| EPS (Diluted) | $0.68 |
| Shares Outstanding (Basic) | 8.28B |
| Shares Outstanding (Diluted) | 8.37B |
Key Highlights
- 1Revenue for the third quarter remained stable at $20.4 billion, while nine-month revenue increased by 9% to $63.45 billion.
- 2Operating income decreased by 8% in the third quarter to $6.97 billion, largely due to a 24% increase in cost of revenue driven by higher sales volumes of Xbox and Surface and increased datacenter expenses.
- 3Diluted Earnings Per Share (EPS) for the third quarter was $0.68, down 6% from the prior year's $0.72.
- 4Cloud Services revenue doubled, demonstrating strong momentum in Microsoft's strategic shift towards cloud-based offerings.
- 5The Devices and Consumer Hardware segment saw significant revenue growth of 41% in the quarter, driven by strong sales of Xbox One and Surface devices.
- 6Total cash, cash equivalents, and short-term investments increased to $88.4 billion, providing substantial liquidity.
- 7Microsoft continued to return capital to shareholders through $1.8 billion in share repurchases during the quarter and consistent dividend payments.