Microsoft capped off a “record year” that has seen the once forgotten tech giant become the most-valuable U.S. company, while still posting healthy growth rates. Microsoft has been a trillion-dollar company since April, and it will stay that way for the time being.
Microsoft finished its fiscal year with 14 percent revenue growth over the prior year and net profits rising 22 percent. Those numbers built on last year’s record performance and show that the 44-year-old company remains on the upswing.
THREAD: $MSFT Q4 EARNINGS
Revenue: $33.7 billion ⬆️ 12%
Operating income: $12.4 billion ⬆️ 20%
Net Income: $13.2 billion GAAP and $10.6 billion non-GAAP ⬆️ 49% and 21% respectively
EPS: $1.71 pic.twitter.com/EDoZmk8mZL
— Microsoft (@Microsoft) July 18, 2019
Overall, Microsoft sailed past analyst expectations in the fourth quarter and posted its highest net profits in years. Here’s how the numbers shook out.
Revenue: In the fourth quarter, Microsoft reported revenue of $33.7 billion, an increase of 12 percent over a year ago and well ahead of analyst expectations of $32.77 billion.
For the year, Microsoft reported a whopping $125.8 billion in revenue, up 14 percent over last year’s record total of $110 billion.
Profits: Net profits of $10.6 billion for the quarter, $1.37 per share, sailed past analyst expectations of $1.21 per share.
For all of 2019, Microsoft raked in $36.8 billion in net profits, up 22 percent over the prior year.
In a statement, Microsoft CEO Satya Nadella saluted the record year and gave credit to the company’s efforts to build strong partnerships across industries.
“It was a record fiscal year for Microsoft, a result of our deep partnerships with leading companies in every industry,” he said. “Every day we work alongside our customers to help them build their own digital capability – innovating with them, creating new businesses with them, and earning their trust. This commitment to our customers’ success is resulting in larger, multi-year commercial cloud agreements and growing momentum across every layer of our technology stack.”
Microsoft stock was up slightly soon after the company announced its results. At close of business Thursday, shares in the tech giant had risen 35 percent since the beginning of the year.
Q4 FY19 revenue by segment
🐝 Productivity & Business Processes: $11 billion ⬆️ 14%
🌩️ Intelligent Cloud: $11.4 billion ⬆️ 19%
💻 More Personal Computing: $11.3 billion ⬆️ 4%
— Microsoft (@Microsoft) July 18, 2019
Microsoft splits the company into three main areas in its earnings reports. Here’s how each one did in the quarter ending in March:
- For the first time ever, the Intelligent Cloud division brought in the most revenue among the three groups. Intelligent cloud revenue rose 19 percent to $11.4 billion, powered by 64 percent annual revenue growth from Azure. Read more about the company’s cloud business performance here.
- In the company’s Productivity and Business Processes division, which includes Office 365 and LinkedIn, revenue increased 14 percent over last year to $11 billion in the quarter.
- Revenue in the company’s More Personal Computing division, which includes its Windows PC business, Surface products and gaming teams jumped 4 percent over last year to $11.3 billion. The gaming division saw a 10 percent drop in revenue in the quarter, cause growth to slow within the division as a whole.
The Surface division kept up the momentum of the last couple quarters, posting $1.35 billion in revenue, good for 14 percent growth over the prior year.
Revenue from LinkedIn grew 25 percent over last year to $1.83 billion. Microsoft a couple quarters ago stopped reporting LinkedIn profits/losses as it continued to fold the business social network into its organization more than two years after completing the $26 billion acquisition.
Revenue growth has slowed in the last few quarters, going from percentages in the upper 30s to high 20s. Microsoft says it is seeing record levels of engagement on the platform.
The Gaming division, which includes everything from Xbox hardware to Xbox Live subscriptions to revenue from games made by Microsoft as well as other studios, was the biggest black (or red in this scenario) mark on the balance sheets in the quarter. Gaming revenue dropped 10 percent to $2.05 billion. The drop was driven by a 48 percent annual decrease in Xbox hardware sales.
The number of Xbox Live users jumped from 57 million a year ago to 65 million in the most recent quarter.
As usual, it was a busy quarter for Microsoft to close out its fiscal year.
- After hitting the $1 trillion valuation milestone for the first time in April, Microsoft has stayed consistently above that line throughout the quarter, giving it some breathing room ahead of Apple and Amazon for the title of the most-valuable U.S. company.
- The gaming side of the company was very busy in the quarter, unveiling a new Xbox console at E3, selling its games on other platforms such as Valve’s Steam marketplace, bringing its Game Pass service to PCs and bundling it with Xbox Live. The company also introduced the augmented reality game Minecraft Earth that just started a private beta test earlier this week.
- Microsoft held its annual Build developer conference in Seattle in May, with a heavy emphasis on privacy and trust. At the conference, the company breezed past a blown HoloLens 2 demo and introduced new tools for election security, brought prized acquisition GitHub closer to its coding products, changed the conversation about digital assistants and brought the Internet Explorer browser back, kind of.
- It wasn’t all rosy for Microsoft during the quarter, as the company faced backlash for a chain of leaked emails from women at the company documenting instances of discrimination and harassment they faced. The issue got the attention of top executives, so much so that Nadella promised to overhaul HR policies to rectify some of the issues raised in the emails.