10-QPeriod: Q1 FY2024

MICROSOFT CORP Quarterly Report for Q1 Ended Sep 30, 2023

Filed October 24, 2023For Securities:MSFT

Summary

Microsoft Corporation (MSFT) reported strong financial results for the first quarter of fiscal year 2024, with total revenue reaching $56.5 billion, 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 billion, 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 billion. 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.

Financial Highlights

53 data points
Beta

Revenue

$56.52B

71.2% Gross Margin

Net Income

$22.29B

39.4% Net Margin

EPS (Diluted)

$2.99

Total Assets

$445.79B

Cash & Equivalents

$80.45B

Free Cash Flow

$20.67B

Financial Statements
Beta
Revenue$56.52B
Cost of Revenue$16.30B
Gross Profit$40.22B
R&D Expenses$6.66B
Operating Income$26.89B
Interest Expense$525.00M
Net Income$22.29B
EPS (Basic)$3.00
EPS (Diluted)$2.99
Shares Outstanding (Basic)7.43B
Shares Outstanding (Diluted)7.46B

Key Highlights

  • 1Total revenue increased by 13% year-over-year to $56.5 billion, driven by growth in Intelligent Cloud and Productivity and Business Processes segments.
  • 2Intelligent Cloud revenue grew 19% to $24.3 billion, with Azure and other cloud services up 29%.
  • 3Productivity and Business Processes revenue rose 13% to $18.6 billion, supported by a 18% increase in Office 365 Commercial revenue.
  • 4Net income saw a significant increase of 27% to $22.3 billion, resulting in diluted EPS of $2.99.
  • 5Microsoft's cash, cash equivalents, and short-term investments stood at a strong $144 billion as of September 30, 2023.
  • 6The company completed the $61.8 billion acquisition of Activision Blizzard, Inc. on October 13, 2023.
  • 7The IRS is seeking $28.9 billion plus penalties and interest related to intercompany transfer pricing audits for tax years 2004-2013.

Frequently Asked Questions

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%).

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.

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.

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.