Microsoft Financial Results: Q3 FY22


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Microsoft’s financial results for Q3 FY22 (Jan – Mar 22) are in and, once again, they’re showing strong growth in all their key focus areas. They also listed several big name customers that they’re working with including:

  • Bridgestone
  • Lufthansa
  • Fujitsu
  • Woolworths
  • Cracker Barrel
  • Heineken

and called out Boeing, Heinz, and Westpac among customers making “strategic” Azure commitments.

Satya Nadella always hits us with a good quote during the earnings call and this quarter’s was:

“The last two years have proven that every organization needs a digital fabric that connects the entire organization”

Let’s take a look at some of the numbers:

Overall

Revenue = $49.4 billion – up 18%

Operating income = $20.4 billion – up 19%

Really strong top line numbers as always – remember, this is for just 3 months!

Productivity & Business Processes

Revenue = $15.8 billion – up 17%

  • Office 365 Commercial up 17%
  • Dynamics 365 up 35%
  • LinkedIn up 35%

Microsoft saw growth in SMB and frontline SKUs as well as increase in Revenue Per User – a key SaaS metric.

Office on-prem revenue was down 28%, continuing the downwards trend that we’ve been seeing for a couple of years now. It was noted as well that the end of Open Licensing has caused a drop in transactional license sales during the last quarter.

Intelligent Cloud

Revenue = $19.1 billion – up 26%

  • Azure (and other cloud services) up 46%
  • Server products up 5%

Another strong showing from Azure…with the number of $100 million Azure deals more than doubling over the previous year.

The server products increase includes Window Server & SQL Server in hybrid use cases (as well as Nuance) and again Microsoft mentioned the impact of Open Licensing’s end.

What else did we learn?

  • Satya Nadella once again called out the performance of Cosmos DB, with 100%+ YoY growth for 3 quarters in a row.
  • Power Platform, as a family, was up 72% year on year.
  • Microsoft Viva has over 10 million monthly active users.

Overall this is another great performance from Microsoft, giving them good momentum as they move into their Q4 (April – June) which is always a busy time of year. It will be interesting to see the full FY results in July for sure!

Microsoft financial results: Q2 FY22


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Microsoft’s financial results are, once again, fantastic. For Q2 FY22 (Oct – Dec 21) their headline results are:

  • Revenue = $51.7 billion, an increase of 20%
  • Operating Income = $22.2 billion, an increase of 24%
  • Net Income = $18.8 billion, an increase of 21%

That’s over $51 billion in 3 months – a single quarter bigger than recent annual revenues for companies like Oracle, Nike, and Coca Cola.

Looking at the separate business units we see the following…

Productivity & Business Processes

  • Revenue = $15.9 billion, up 19%
  • Office 365 Commercial up 19%
    • “Continued momentum” for E5
  • LinkedIn up 37%
  • Dynamics 365 up 45%
  • Power Apps up 161%
  • Office Commercial (i.e on-premises) down 17%

Intelligent Cloud

  • Revenue = $18.3 billion
  • Azure up 46%
    • “Significant growth” in long-term contracts (again)
  • Enterprise Mobility up to 209 million+ seats

Yet more strong double digit growth across all these product divisions, as we’ve seen so many times before over the last few years. Although the growth is still very strong with Azure, it’s perhaps worth noting that the % increase is dropping slightly over time…from 50 in Q1 to now 46…although this makes sense – as the base grows, maintaining the same % increase becomes more difficult.

We also saw that the security business surpassed $15 billion in revenue, up almost 45% YoY.

“Digital technology is the most malleable resource at the world’s disposal to overcome constraints and reimagine everyday work and life.”

Earnings Call

There is always plenty of great info in the earnings call and this quarter was no different.

  • Azure Arc has tripled its user base YoY as organisations expand hybrid environments.
  • New Azure customers include:
    • CVS Health
    • Johnson & Johnson Medical Devices
    • Kyndryl
    • Wells Fargo
  • Cosmos DB transactions increased 100% YoY
  • Industry Clouds are driving “significant usage” across Microsoft Cloud
  • Teams has 270 million+ monthly active users
  • Microsoft Viva has over 1,000 paying customers already
  • Microsoft Sentinel has over 15,000 customers – a 70% increase YoY

Satya Nadella also discussed “Dynamics 365 Connected Spaces” (currently in preview) which is focused on automating and managing physical processes. This is part of their “Metaverse” play for business.

Note that many of the new “exotic” products are being name checked here:

  • Azure Arc
  • Cosmos DB
  • Industry Clouds
  • Power Apps
  • Microsoft Sentinel

This really helps to highlight Microsoft’s future plans and the successful growth they’re seeing there already. It also seems that there’s plenty of room for growth over the next few years so it doesn’t seem that Microsoft’s growth will be slowing any time soon.

Further Reading

Microsoft Earnings Press Release & documents

Microsoft financial results Q1 FY22: Power Apps up 202%


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Microsoft’s latest financial results, those for Q1 FY22 (July – August 2021) are in and – as has been the case for the recent memory – they smashed it again.

Revenue for the quarter was $45.3 billion – a year-on-year increase of 22% and operating income was up 27% to $20.2 billion.

The overall “Microsoft Cloud” area broke $20 billion quarterly revenue for the first time with growth of 36% to reach $20.7 billion. However, Microsoft Cloud gross margin did drop slightly to a mere 71%!

During the earnings call, Satya Nadella said:

“Digital technology is a deflationary force in an inflationary economy”

Which helps explain why the cloud, and technology like Power Platform, keeps growing…they’re helping level the playing field and help smaller organisations grow and compete.

Productivity & Business Processes

This division was up 22% to $15 billion for the quarter, driven by growth in various elements:

  • Office 365 Commercial was up 23%
  • LinkedIn was up 42%
  • Dynamics 365 was up 48%

This is strong growth in several key areas for Microsoft and they don’t believe it will slow down next quarter either.

Intelligent Cloud

Revenue here was $17 billion driven by Azure growth of 50%. The rise of Azure doesn’t seem to be slowing down!

More Personal Computing

Windows OEM was up 10%, despite the ongoing supply chain issues for PCs and laptops…but Surface was down 17%. This is perhaps due to the constraint issues impacting more on higher end devices at the moment.

Other areas of interest

There were various additional statements made during the earnings call including:

  • Power Platform reaches almost 20 million monthly active users (MAU) – up 76% year-on-year (YoY). Of that, Power Apps makes up 10 million MAU and grew 202% YoY…Nadella states it is in use within 91% of the Fortune 500.
  • Satya Nadella made several references to the size of organisations that are using products such as Power Platform and Teams – pointing out how many 10,000+ and 100,000+ user organisations are customers.
  • Microsoft now have over 650,000 customers using their security solutions. How many of those are using more than Defender in Windows 10 would be interesting to see…
  • Office Commercial licensing decreased by 13%, continuing Microsoft’s ongoing transition of their customer base from on-prem to cloud.
  • Enterprise Mobility + Security is now at 196 million seats.
  • Amy Hood revealed that Microsoft have increased headcount by 14% YoY, which is a pretty significant hiring drive.

Further Reading

Microsoft Results Press Release

Microsoft Financial Results: Q3 FY21


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Microsoft’s financial results for Q3 FY21 (Jan – Mar 21) are in and, as usual, they’re pretty impressive.

  • Revenue = $41.7 billion – up 19%
  • Operating income = $17 billion – up 31%

Looking at the different product divisions we can see:

Productivity & Business Processes

Revenue = $13.6 billion – up 15%

Office 365 Commercial was up 22%, LinkedIn increased 25%, and Dynamics 365 was up 45%.

Microsoft Teams is up to 145 million daily active users, almost doubling YoY and Office 365 Commercial has nearly 300 million paid seats. Office Commercial products (on-premises Office) was down 25% – continuing its downwards trend as organisations continue to move to the cloud.

Satya Nadella revealed that Power Platform now has almost 16 million monthly active users, an increase of 97%, and revenue has increased by 84%. Amy Hood (CFO) called out Power Apps and Dynamics 365 Finance & Operations as strong performers.

Intelligent Cloud

Revenue = $15.1 billion – up 23%

Azure growth was 50% yet again, with Amy Hood highlighting an increase in the number of large, long-term Azure contracts.

On-premises server products grew 3%, although that seems to largely be due to year on year currency fluctuations, and the EMS install base grew again, now sitting at 174 million seats.

SQL Server on Azure VMs grew 129% YoY alongside Cosmos DB growth too.

More Personal Computing

Revenue = $13 billion – up 19%

Again there was a big difference in Windows OEM as Pro revenue declined 2% but non-Pro grew 44%.

See the Microsoft details here.

Microsoft financial results: Q2 FY21


Microsoft have, once again, had a stellar quarter (Oct-Dec 20) with overall results of:

  • Revenue up 17% to $43.1 billion
  • Operating income up 29% to $17.9 billion

Looking deeper into specific product categories and areas we can see:

Productivity and Business Processes

Revenue was up 13% to $13.4 billion which included:

  • Office 365 Commercial up 21%
  • Dynamics 365 up 39%
  • LinkedIn up 23%

Intelligent Cloud

Revenue was up 23% to $14.6 billion and Azure was revenue growth of 50%

More Personal Computing

The “other” parts of Microsoft’s business all saw success to with revenue up 14% to $15.1 billion. This included:

  • Windows Commercial up 10%
  • Xbox up 40%
  • Surface up 3%

Microsoft’s results are very consistent and are outperforming pretty much every comparable competitor you can think of…Oracle, SAP, and IBM are very far away from numbers like these! Amazon are still seeing great success with AWS – currently rising around 28% – but that is a greatly limited portfolio when compared to that under Satya Nadella’s control.

There are several areas of Microsoft’s product line-up which are at the very start of their evolution and will grow and continue these results for the foreseeable future.

See the full info from Microsoft here.

Microsoft Financial Results: Q1 FY21


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As I think most of us expected, Microsoft’s strong financial results continued in Q1 FY21.

Headline figures

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.

Product Highlights

  • 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!

Further Reading

https://www.microsoft.com/en-us/Investor/earnings/FY-2021-Q1/press-release-webcast

Microsoft FY20 Financial Results


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Microsoft had, as expected, a great Q4 with revenue up 13% to $38 billion, which closed out an equally good fiscal year. Overall revenue of $143 billion, and operating income of $44.3 billion, was driven by revenue increases in all Microsoft’s key areas:

  • Office 365 was up 19%
  • Dynamics 365 was up 38%
  • LinkedIn increased by 10%
  • Azure was up 47%

Although the Azure growth was lower than previous quarters, it still seems healthy enough for now.

Microsoft called out some interesting points during their earnings call, some of which give a good indication of future direction including:

Slowdown in transactional licensing and flat on-premises server revenue: While this may be down, at least in part, to the impact of COVID-19 – it is also where Microsoft are heading. This is also shown by the fact that Office Commercial (on-premises Office) was down 34% -which Microsoft attributed to a combination of COVID-19 and the move to annuity licensing.

As long as those transactional licenses and on-premises server software are being replaced by CSP, Microsoft 365, and Azure – Redmond will be happy. I’ll be keen to see if this numbers start to rise again as the economic situation stabilises.

Bigger, longer Azure contracts: They stated “material growth” in Azure contracts over $10 million which is good news for Microsoft. For everyone in this new subscription based world, locking customers in to longer term deals is a key aim as it makes it easier for the vendor to forecast and budget.

Increased ARPU for Office 365: Average Revenue Per User (ARPU) is a key metric for many of today’s organisations and an increase means Microsoft are making more money per user. This could be as they upgrade to higher level plans (E3 to E5 for example) or purchase add-ons to their existing licenses. The Office 365 seat count increased and the ARPU increased, which are both positive for Microsoft.

All in all, a very positive performance from Microsoft that clearly shows their focus on cloud continues to pay off. Looking ahead to this financial year, FY 21, I think we’ll see more focus on E5 – particularly for security and voice workloads, Power Platform continuing to appear in new places, and increased pressure on those organisations looking to remain on-premises.

See the Microsoft press release and figures here.

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