10-QPeriod: Q1 FY2020

MICROSOFT CORP Quarterly Report for Q1 Ended Sep 30, 2019

Filed October 23, 2019For Securities:MSFT

Summary

Microsoft Corporation (MSFT) reported strong financial results for the first quarter of fiscal year 2020, ending September 30, 2019. Total revenue increased by 14% year-over-year to $33.1 billion, driven by robust performance across all three segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. Net income saw a significant jump of 21% to $10.7 billion, translating to diluted earnings per share of $1.38, up from $1.14 in the prior year's comparable quarter. The company's strategic focus on cloud services continues to yield impressive results, with commercial cloud revenue surging by 36% to $11.6 billion. Key growth drivers include Azure, which reported a 59% increase in revenue, and Office 365 Commercial, up 25%. This growth, coupled with solid performance in Windows OEM licensing and Dynamics 365, indicates Microsoft's continued dominance and ability to adapt in a rapidly evolving technology landscape. The company also maintained a strong balance sheet with substantial cash and investments, demonstrating financial resilience.

Financial Highlights

53 data points
Beta

Revenue

$33.05B

68.5% Gross Margin

Net Income

$10.68B

32.3% Net Margin

EPS (Diluted)

$1.38

Total Assets

$278.95B

Cash & Equivalents

$13.12B

Free Cash Flow

$10.43B

Financial Statements
Beta
Revenue$33.05B
Cost of Revenue$10.41B
Gross Profit$22.65B
R&D Expenses$4.57B
Operating Income$12.69B
Interest Expense$637.00M
Net Income$10.68B
EPS (Basic)$1.40
EPS (Diluted)$1.38
Shares Outstanding (Basic)7.63B
Shares Outstanding (Diluted)7.71B

Key Highlights

  • 1Total revenue grew 14% to $33.1 billion, demonstrating broad-based growth across all segments.
  • 2Net income increased 21% to $10.7 billion, with diluted EPS rising to $1.38 from $1.14 year-over-year.
  • 3Commercial cloud revenue surged 36% to $11.6 billion, highlighting the success of Microsoft's cloud strategy.
  • 4Azure revenue growth remained exceptionally strong at 59%, underscoring its market leadership.
  • 5Productivity and Business Processes segment revenue increased 13%, driven by Office 365 Commercial and LinkedIn.
  • 6More Personal Computing segment revenue saw a 4% increase, with notable growth in Windows OEM licensing and Windows Commercial.
  • 7Microsoft maintained a substantial cash and investment balance of $136.6 billion, providing financial flexibility.

Frequently Asked Questions

Revenue growth was primarily driven by the Intelligent Cloud segment, fueled by a 59% increase in Azure revenue and a 12% increase in server products revenue. The Productivity and Business Processes segment also contributed significantly with a 13% revenue increase, largely due to Office 365 Commercial growth and strong performance from LinkedIn. More Personal Computing also saw a 4% revenue increase, with Windows OEM licensing and Windows Commercial showing particular strength.

Microsoft's commercial cloud revenue demonstrated exceptional growth, increasing by 36% to $11.6 billion. This segment includes key offerings like Microsoft Office 365 Commercial, Microsoft Azure, the commercial portion of LinkedIn, and Microsoft Dynamics 365. The strong performance of Azure (up 59%) and Office 365 Commercial (up 25%) indicates continued customer adoption and market leadership in cloud services.

Microsoft maintained a very strong financial position, with cash, cash equivalents, and short-term investments totaling $136.6 billion as of September 30, 2019. This substantial liquidity provides the company with significant financial flexibility for ongoing investments, strategic acquisitions, share repurchases, and dividend payments.

Research and development expenses increased by 15% to $4.6 billion, reflecting investments in cloud, AI engineering, Gaming, GitHub, and LinkedIn. Sales and marketing expenses rose by 6% due to investments in LinkedIn, GitHub, and revenue-driven expenses. General and administrative expenses decreased by 8%.