01—Abstract
Summary
Summary of the 10-Q filed October 24, 2023. Cited figures are marked; the original filing is the authoritative source.
Microsoft Corporation (MSFT) reported strong financial results for the first quarter of fiscal year 2024, with total revenue reaching $56.5 billiona, a 13% increase year-over-year.
This growth was primarily driven by the Intelligent Cloud segment, which saw a 19% revenue increase to $24.3 billionb, fueled by Azure and other cloud services growing 29%. The Productivity and Business Processes segment also demonstrated robust performance, with a 13% revenue increase to $18.6 billion, largely due to the strong uptake of Office 365 Commercial. Net income surged by 27% to $22.3 billion, translating to diluted earnings per share of $2.99, up from $2.35 in the prior year period.
The company's liquidity remains strong, with cash, cash equivalents, and short-term investments totaling $144 billionc. A significant subsequent event noted is the completion of the Activision Blizzard acquisition for $61.8 billion, which is expected to accelerate growth in Microsoft's gaming business. Investors should note the ongoing IRS audit concerning intercompany transfer pricing, where the IRS is seeking an additional $28.9 billion plus penalties and interest.
02—Key points
Key Highlights
- Total revenue increased by 13% year-over-year to $56.5 billion, driven by growth in Intelligent Cloud and Productivity and Business Processes segments.
- Intelligent Cloud revenue grew 19% to $24.3 billion, with Azure and other cloud services up 29%.
- Productivity and Business Processes revenue rose 13% to $18.6 billion, supported by a 18% increase in Office 365 Commercial revenue.
- Net income saw a significant increase of 27% to $22.3 billion, resulting in diluted EPS of $2.99.
- Microsoft's cash, cash equivalents, and short-term investments stood at a strong $144 billion as of September 30, 2023.
- The company completed the $61.8 billion acquisition of Activision Blizzard, Inc. on October 13, 2023.
- The IRS is seeking $28.9 billion plus penalties and interest related to intercompany transfer pricing audits for tax years 2004-2013.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2024, Microsoft Corp kept $0.39.
- Revenue$56.52B100.0%
- Cost of revenue−$16.30B28.8%
- Gross profit$40.22B71.2%
- Operating costs−$13.32B23.6%
- Operating income$26.89B47.6%
- Interest, other & tax−$4.60B8.1%
- Net income$22.29B39.4%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed October 24, 2023Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $56.52B$50.12B | +12.8% |
| Cost of Revenue | $16.30B$15.45B | +5.5% |
| Gross Profit | $40.22B$34.67B | +16.0% |
| R&D Expenses | $6.66B$6.63B | +0.5% |
| Operating Income | $26.89B$21.52B | +25.0% |
| Interest Expense | $525.00M$500.00M | +5.0% |
| Net Income | $22.29B$17.56B | +27.0% |
| EPS (Basic) | $3.00$2.35 | +27.7% |
| EPS (Diluted) | $2.99$2.35 | +27.2% |
| Shares Outstanding (Basic) | 7.43B7.46B | −0.4% |
| Shares Outstanding (Diluted) | 7.46B7.49B | −0.3% |
05—Questions
Frequently Asked Questions
What drove Microsoft's revenue growth in this quarter?
Microsoft's revenue growth was primarily driven by its Intelligent Cloud segment, which saw a 19% increase in revenue to $24.3 billion, largely due to the performance of Azure and other cloud services (up 29%). The Productivity and Business Processes segment also contributed significantly with a 13% revenue increase to $18.6 billion, mainly from Office 365 Commercial growth (up 18%).
How did Microsoft's profitability change compared to the previous year?
Microsoft's profitability improved significantly. Net income increased by 27% to $22.3 billion, and diluted earnings per share rose to $2.99 from $2.35 in the same period last year. This improvement reflects strong revenue growth and improved gross margins across key segments.
What is the financial impact of the Activision Blizzard acquisition?
Microsoft completed the acquisition of Activision Blizzard for $61.8 billion on October 13, 2023. While the preliminary purchase price allocation is not yet complete, the acquisition is expected to accelerate growth in Microsoft's gaming business and will be reported within the More Personal Computing segment. The full financial impact will be detailed in future filings.
Are there any significant tax-related risks or liabilities mentioned?
Yes, Microsoft is undergoing an IRS audit concerning intercompany transfer pricing for tax years 2004-2013. The IRS has issued Notices of Proposed Adjustment (NOPAs) seeking an additional tax payment of $28.9 billion, plus penalties and interest. Microsoft believes its allowances for income tax contingencies are adequate and intends to contest these proposed adjustments.
06—Continue