01—Abstract
Summary
Summary of the 8-K filed January 30, 2024. Cited figures are marked; the original filing is the authoritative source.
Microsoft reported fiscal Q2 2024 results (quarter ended December 31, 2023) that beat the prior-year period across every headline metric.
Revenue reached $62.0 billiona, up 18% (16% in constant currency). GAAP operating income rose 33% to $27.0 billion, and diluted EPS was $2.93, up 33% on a GAAP basis. Excluding the prior-year severance, impairment, and lease consolidation charge, non-GAAP operating income grew 25% and non-GAAP EPS grew 26%.
Management highlighted Microsoft Cloud revenue of $33.7 billionb, up 24%, and Azure and other cloud services growth of 30%, which it attributed to AI being applied at scale across the tech stack. The quarter also included the first full-quarter contribution from the Activision Blizzard acquisition, completed October 13, 2023, which is reported in the More Personal Computing segment. Xbox content and services revenue rose 61%, with 55 points of that growth coming from the acquisition.
Investors should note that the acquisition drove a large jump in acquisition-related cash outflows and balance sheet changes: goodwill rose to $118.9 billionc from $67.9 billion, and net cash used in investing activities reached $71.9 billion in the quarter. Cash and short-term investments fell to $81.0 billion from $111.3 billion at June 30, 2023, while short-term debt increased to $27.0 billion. Microsoft returned $8.4 billion to shareholders through share repurchases and dividends during the quarter.
The company did not provide forward-looking guidance in this 8-K, which stated that guidance would be given on the earnings call. The 8-K is furnished, not filed, under Item 2.02, so the press release information is not subject to Section 18 liability unless specifically incorporated by reference.
02—Key points
Key Highlights
- Revenue of $62.0B, up 18% Y/Y (16% constant currency); operating income of $27.0B, up 33% GAAP and 25% non-GAAP
- Diluted EPS of $2.93, up 33% GAAP and 26% non-GAAP; net income of $21.9B, up 33%
- Microsoft Cloud revenue of $33.7B, up 24%; Azure and other cloud services revenue grew 30%
- Activision Blizzard acquisition closed October 13, 2023; Xbox content and services revenue rose 61%, with 55 points from the acquisition
- Goodwill rose to $118.9B from $67.9B and intangible assets to $29.9B, reflecting the acquisition; net cash used in investing was $71.9B in the quarter
- Cash and short-term investments declined to $81.0B from $111.3B at June 30, 2023, while short-term debt rose to $27.0B
- $8.4B returned to shareholders through buybacks and dividends; no forward-looking guidance included in the 8-K
03—Questions
Frequently Asked Questions
How strong was Microsoft's growth in the quarter ended December 31, 2023?
Growth was strong across the board. Revenue rose 18% to $62.0 billion, GAAP operating income rose 33% to $27.0 billion, and GAAP diluted EPS rose 33% to $2.93. Growth was somewhat lower in constant currency terms, with revenue up 16% and non-GAAP operating income up 23%.
How much of the growth came from the Activision Blizzard acquisition?
The acquisition contributed meaningfully to the More Personal Computing segment, which grew 19% to $16.9 billion. The release says Xbox content and services revenue grew 61%, with 55 points of that growth attributable to Activision. Because the deal closed on October 13, 2023, the quarter includes only a partial period of contribution, so the figure reflects a partial quarter's results.
Why did the GAAP and non-GAAP operating income growth rates differ?
The prior-year quarter (Q2 FY2023) included a $1.2 billion charge for severance, hardware-related impairment, and lease consolidation costs tied to January 2023 decisions. Excluding that charge, the prior-year base was higher, so non-GAAP operating income growth (25%) is lower than the GAAP growth rate (33%).
What does the balance sheet show about the cost of the acquisition and Microsoft's liquidity?
Goodwill nearly doubled to $118.9 billion and intangible assets tripled to $29.9 billion. Cash and short-term investments fell by about $30 billion to $81.0 billion, and short-term debt rose to $27.0 billion. Investors should watch how Microsoft manages its liquidity and debt levels as it absorbs these acquisition-related costs.
Did Microsoft provide new financial guidance in this 8-K?
No. The 8-K states that forward-looking guidance would be provided on the earnings conference call and webcast held the same day, so investors should consult the call for outlook information.
04—Continue