In a year dedicated to helping customers “navigate their own digital transformations” (to quote CEO Satya Nadella), Microsoft Corp. has announced its earnings for the quarter ended June 30, 2016, with strong cloud performance and positive net income sending the stock higher in after hours trading.
Among the highlights:
- Revenue was $20.6 billion GAAP, and $22.6 billion non-GAAP
- Operating income was $3.1 billion GAAP, and $6.2 billion non-GAAP
- Net income was $3.1 billion GAAP, and $5.5 billion non-GAAP
- Diluted earnings per share was $0.39 GAAP, and $0.69 non-GAAP
Microsoft reported $12.1 billion for its commercial cloud annualized revenue run rate. The rate is calculated by taking revenue in the final month of the quarter multiplied by twelve for Office 365 commercial, Azure, Dynamics, and other cloud.
Revenue in Productivity and Business Processes, where the Dynamics suite sits, grew 5% (up 8% in constant currency) to $7.0 billion. Dynamics products and cloud services revenue grew 6% (up 7% in constant currency) with Dynamics CRM Online paid seats growing more than 2.5x year-over-year.
Office commercial products and cloud services revenue grew 5% (up 9% in constant currency) driven by Office 365 commercial revenue growth of 54% (up 59% in constant currency).
Revenue in Intelligent Cloud grew 7% (up 10% in constant currency) to $6.7 billion. Azure revenue alone grew 102% (up 108% in constant currency) with Azure compute usage more than doubling year-over-year. Also in the Intelligent Cloud division:
- Enterprise Mobility customers nearly doubled year-over-year to over 33,000, and the installed base grew nearly 2.5x year-over-year
- Server products and cloud services revenue increased 5% (up 8% in constant currency) driven by double-digit annuity revenue growth
FY 2015 saw about $19 billion in impairment, integration and restructuring expenses, down to about $2 billion for FY 2016. But, this quarter sees net impact from Windows 10 Revenue Deferrals of $2.0 billion during the three months ended June 30, 2016, and net revenue deferrals of $6.6 billion during the twelve months ended June 30, 2016, related to Windows 10.
More Personal Computing down 4%
With gains in all but one product line, revenue in More Personal Computing still declined 4% (down 2% in constant currency) to $8.9 billion. Among the highlights:
- Windows OEM non-Pro revenue grew 27% (up 27% in constant currency), outpacing the consumer PC market, and Windows OEM Pro revenue grew 2% (up 2% in constant currency)
- Surface revenue increased 9% (up 9% in constant currency) driven by Surface Pro 4 and Surface Book
- Phone revenue declined 71% (down 70% in constant currency)
- Xbox Live monthly active users grew 33% year-over-year to 49 million
- Search advertising revenue excluding traffic acquisition costs grew 16% (up 17% in constant currency) with continued benefit from Windows 10 usage