10-QPeriod: Q3 FY2021

MICROSOFT CORP Quarterly Report for Q3 Ended Mar 31, 2021

Filed April 27, 2021For Securities:MSFT

Summary

Microsoft Corporation reported strong financial performance for the third quarter and nine months ended March 31, 2021. Total revenue grew by 19% year-over-year to $41.7 billion for the quarter, and by 16% to $121.9 billion for the nine-month period. Net income also saw substantial increases, rising 44% to $15.5 billion for the quarter and 35% to $44.8 billion for the nine months. This growth was driven across all segments, with particular strength in Intelligent Cloud (Azure growth of 50%), More Personal Computing (Gaming revenue up 50%), and Productivity and Business Processes (Office 365 Commercial growth of 22%). The company also benefited from a significant tax benefit related to an India Supreme Court decision, which boosted net income by $620 million. Significant strategic developments include the completion of the ZeniMax Media acquisition for $8.1 billion, enhancing the More Personal Computing segment, and the announcement of the Nuance Communications acquisition for $19.7 billion, aimed at bolstering cloud and AI capabilities. Microsoft continues to return capital to shareholders through share repurchases and dividends, while maintaining a strong liquidity position.

Financial Highlights

53 data points
Beta

Revenue

$41.71B

68.7% Gross Margin

Net Income

$15.46B

37.1% Net Margin

EPS (Diluted)

$2.03

Total Assets

$308.88B

Cash & Equivalents

$13.70B

Free Cash Flow

$17.09B

Financial Statements
Beta
Revenue$41.71B
Cost of Revenue$13.04B
Gross Profit$28.66B
R&D Expenses$5.20B
Operating Income$17.05B
Interest Expense$633.00M
Net Income$15.46B
EPS (Basic)$2.05
EPS (Diluted)$2.03
Shares Outstanding (Basic)7.54B
Shares Outstanding (Diluted)7.60B

Key Highlights

  • 1Total revenue increased 19% to $41.7 billion in Q3 FY21.
  • 2Net income surged 44% to $15.5 billion in Q3 FY21.
  • 3Intelligent Cloud segment revenue grew 23%, driven by a 50% increase in Azure.
  • 4More Personal Computing revenue increased 19%, boosted by a 50% rise in Gaming revenue.
  • 5Productivity and Business Processes revenue rose 15%, with Office 365 Commercial up 22%.
  • 6Acquisition of ZeniMax Media for $8.1 billion completed; Nuance Communications acquisition announced for $19.7 billion.
  • 7A $620 million tax benefit was recognized due to an India Supreme Court decision on withholding taxes.

Frequently Asked Questions

Revenue growth was broad-based across all segments. Key drivers included strong performance in Azure (Intelligent Cloud), robust gaming revenue and Xbox content/services (More Personal Computing), and continued expansion of Office 365 Commercial subscriptions (Productivity and Business Processes). The acquisition of ZeniMax also contributed to the More Personal Computing segment's results.

The acquisition of ZeniMax Media Inc. was completed on March 9, 2021, for $8.1 billion. Its financial results have been included since that date, primarily contributing to the 'More Personal Computing' segment. This acquisition added goodwill of $5.6 billion and intangible assets of $1.9 billion.

The India Supreme Court ruled favorably on withholding taxes for software sales. Microsoft recognized a net income tax benefit of $620 million in the third quarter of fiscal year 2021 as a result of this decision, which impacted prior fiscal years. This benefit significantly boosted net income and diluted EPS for the period.

The announced acquisition of Nuance Communications for $19.7 billion, expected to close by the end of 2021, signals Microsoft's continued focus on expanding its industry-specific cloud offerings and Artificial Intelligence (AI) capabilities, particularly in healthcare and enterprise AI. This strategic move is intended to build on existing strengths and drive future growth.