Microsoft Cloud Strength Highlights Mixed Third Quarter Results

posted in: Cloud/SAAS, Microsoft Dynamics | 0

By:  Dann Anthony Maurno

Microsoft has released results for the quarter ended March 31, 2016, and once again, the cloud provided the brightest highlights.

Azure revenue grew by 120% year-over-year (YoY), while Dynamics CRM Online seats more than doubled YoY and enterprise mobility customers more than doubled.

“Digital transformation is the number one priority on our customers’ agenda,” said Microsoft COO Kevin Turner in a statement. “Companies from large established businesses to emerging start-ups are turning to our cloud solutions to help them move faster and generate new revenue.”

For Microsoft overall results:

  • Revenue was $20.5 billion GAAP, and $22.1 billion non-GAAP
  • Operating income was $5.3 billion GAAP, and $6.8 billion non-GAAP
  • Net income was $3.8 billion GAAP, and $5.0 billion non-GAAP
  • Earnings per share was $0.47 GAAP, and $0.62 non-GAAP

Those GAAP figures paint a fairly somber picture, with revenues down 6% compared to Q3 2015; operating income down 20%; Net income down 25%; and Earnings per Share down 23%.

The Constant Currency method (which takes into account foreign currency fluctuations) yields far rosier results, with Revenue up 5%; Operating Income up 10%; Net Income up 6%; and Earnings per Share up 10%.

Similarly, Earnings per Share were just $0.47 – down 23% YoY. They remained even by non-GAAP measures, but were up 10% using Constant Currency.

That non-GAAP $0.62 figure is two cents short of analysts’ forecasted profit of $0.64 per share on a revenue of $22.09 billion, though revenue was nearly spot-on against expectations at $22.1 billion non-GAAP.

Revenue in Productivity and Business Processes – where the Dynamics products sit – grew 1% (up 6% in constant currency) to $6.5 billion, with the following business highlights:

  • Dynamics products and cloud services revenue grew 9% in constant currency with Dynamics CRM Online seat adds more than doubling year-over-year
  • Office commercial products and cloud services revenue grew 7% in constant currency driven by Office 365 revenue growth of 63% in constant currency
  • Office consumer products and cloud services revenue grew 6% in constant currency with Office 365 consumer subscribers increasing to 22.2 million

Revenue in Intelligent Cloud grew 3% (up 8% in constant currency) to $6.1 billion, with the following business highlights:

  • Azure revenue grew 120% in constant currency with usage of Azure compute and Azure SQL database more than doubling year-over-year
  • Enterprise Mobility customers more than doubled year-over-year to over 27,000, and the installed base grew nearly 4x year-over-year
  • Server products and cloud services revenue increased 5% in constant currency driven by double-digit annuity revenue growth

Revenue in More Personal Computing grew 1% (up 3% in constant currency) to $9.5 billion, with the following business highlights:

  • Windows OEM revenue declined 2% in constant currency, outperforming the PC market, driven by higher consumer premium device mix
  • Surface revenue increased 61% in constant currency driven by Surface Pro 4 and Surface Book
  • Phone revenue declined 46% in constant currency
  • Xbox Live monthly active users grew 26% year-over-year to 46 million

Search advertising revenue excluding traffic acquisition costs grew 18% in constant currency with continued benefit from Windows 10 usage.

About Dann Anthony Maurno

Dann Anthony Maurno is a seasoned business journalist who began his career as International Marketing Manager with Lilly Software, then moved on as a freelancer to write for such prestigious clients as CFO Magazine; Compliance Week;Manufacturing Business Technology; Decision Resources, Inc.; The Economist Intelligence Unit; and corporate clients such as Iron Mountain, Microsoft and SAP. He is the co-author of Thin Air: How Wireless Technology Supports Lean Initiatives(CRC/Productivity Press, 2010).

Dann can be reached at [email protected].