As I think most of us expected, Microsoft’s strong financial results continued in Q1 FY21.
In July – September 2020, Microsoft saw:
- Revenue up 12% to $37.2 billion
- Operating Income up 25% to $15.9 billion
- Net Income up 30% to $13.9 billion
- Operating Expenses grew by 10% (primarily driven by investments in Azure)
This is a fantastic performance as Microsoft – unlike many of their rivals – continue to grow and thrive during the COVID-19 pandemic. While IBM, Oracle, and SAP are all reporting lacklustre numbers – Microsoft are doing very well. This is mainly due to Microsoft’s wide and varied portfolio – if you don’t want one thing, there are plenty of others they can sell you – but also due to the relevance of their product line-up.
Not only are Microsoft 365 and Azure hugely relevant right now, so are products like the Power Platform and Dynamics 365 as they enable new ways of working and digital transformation. This is a strength many of their competitors don’t have – if you don’t want to buy a big database or an ERP system, that dramatically reduces the options for Oracle & SAP for example.
- Office 365 commercial revenue was up 21%
- Dynamics 365 again grew by 38%
- Azure saw another quarter of 48% growth
- LinkedIn was up 16%
- Surface revenue rose 37%
- Enterprise Mobility & Security install base has grown to 152 million+ seats
On the flip side – Office Commercial was down 30% showing the move away from on-premises perpetual to cloud-based subscriptions continues apace.
Microsoft also called out “continued weakness” in transactional licensing as they saw a 1% drop in “server products” revenue. To be honest, I’m surprised it isn’t a bigger drop than that…
Another drop in Windows Pro OEM sales (22%) while Windows non-Pro OEM grew by 31%. This will partly be due to organisations de-prioritising laptop refreshes right now but also, I suspect, by users working from home buying themselves new “work” devices. That latter aspect opens up some licensing issues – as volume licensing Windows licenses generally can’t be applied to Windows Home licenses.
Microsoft are in a very strong position and it’s further proof that Satya Nadella has overseen one of the greatest corporate turnarounds for a long time!