Microsoft Reports $24.1 Billion in Revenue for Q2 FY17

Last week Microsoft Corp. (NASDAQ: MSFT), the third largest publicly-traded company in the world, reported financials for the period ended December 31, 2016, the

Last week Microsoft Corp. (NASDAQ: MSFT), the third largest publicly-traded company in the world, reported financials for the period ended December 31, 2016, the company’s second quarter of fiscal year 2017. The company reported revenue of $24.1 billion (GAAP), a slight increase over revenue of $23.8 billion reported for the same period last year.

Other highlights for Q2 of fiscal year 2017 include:

  • Revenue in Productivity and Business processes was $7.4 billion, a 10 percent increase year-over-year.
  • Revenue in Intelligent Cloud was $6.9 billion, a 8 percent increase year-over-year.
  • Revenue in More Personal Computing was $11.8 billion, a 5 percent decrease year-over-year.
  • From December 8 through December 31, LinkedIn contributed $228 million in revenue.
  • Operating income was $6.2 billion (GAAP).
  • Net income was $5.2 billion (GAAP).
  • Diluted earnings per share were $0.66 (GAAP).
  • Office 365 commercial revenue grew 47 percent.
  • Office 365 consumer subscribers increased to 24.9 million from 24.0 million in the prior period.
  • Gaming revenue decreased by 3 percent due to lower Xbox console revenue which was offset by Xbox software and services revenue.
  • Microsoft recorded net revenue deferrals of $2.0 billion during the period from Windows 10.

From an operational perspective, Microsoft completed the acquisition of LinkedIn which took place on December 8 after receiving approval from the necessary regulatory bodies, including the EU. The company also sold its feature phone business during the quarter, and aquired Maluuba.

Subscription News: Microsoft Reports $24.1 Billion in Revenue for Q2 FY17

Source: Microsoft

“Wherever I go in my travels, whether in conversations with heads of state, NGOs or CEOs, the common thread is the transformative power of digital technology to unlock new opportunity. Everyone I meet is talking about building their own digital capability to transform their product, service and business model,” said Satya Nadella, CEO at Microsoft, in an earnings call.

“They are looking to Microsoft for security, productivity, business process, cloud, and AI platforms to help drive their own transformation. In this last quarter, we have continued to build momentum across all these areas and in particular, AI,” Nadella added.

Nadella also commented on the LinkedIn acquisition:

“We completed the acquisition of LinkedIn in December, marking the start of our journey to bring together the world’s professional cloud with the world’s leading professional network. Our top priority is to ensure we innovate and drive value for LinkedIn members and grow daily engagement. The LinkedIn business solutions – Hire, Market, Sell and Learn – represent an expanded market opportunity for Microsoft and we plan to diligently execute on this opportunity keeping the ‘member first’ focus.

We are seeing good results with the core experience, with our revamped mobile app driving significant engagement growth in 2016. This quarter, sessions on LinkedIn grew more than 20 percent year-over-year, a consistent level of growth throughout 2016. We also achieved record levels of mobile page views and feed interaction, creating a healthy foundation for LinkedIn’s Marketing Solutions, which includes the rapidly growing Sponsored Updates,” Nadella said.

In Microsoft’s earnings statement, the company reported that it had returned $6.5 billion to shareholders in the form of share repurchases and dividends in the second quarter.

“I am pleased with our results this quarter. We see strong demand for our cloud-based services and are executing well on our long-term growth strategy,” said Amy Hood, executive vice president and CFO for Microsoft.

Investors reacted favorably to the better-than-anticipated quarterly results which were reported after the close of trading on January 26.

Subscription News: Microsoft Reports $24.1 Billion in Revenue for Q2 FY17

Source: Google Finance – Yahoo Finance – MSN Money

At the close of trading on January 26, Microsoft stock stood at $64.27 per share. On Friday, it closed at $65.78 per share, a difference of $1.51. Friday’s closing price was $11.07 higher than Microsoft’s price of $54.71 per share on February 1, 2016. What a difference a year makes.

Matt Day of The Seattle Times reported that, after a 17-year lull, this latest earnings report and the resulting stock increase makes Microsoft a $500 billion company again, at a value of $511 billion. Microsoft is only exceeded in value by Apple at $641 billion and Alphabet, the parent company of Google, at $575 billion, as of Friday, said Day. Amazon, another Seattle area company, is valued at $397 billion.

In the next quarter, Microsoft projects commercial unearned revenue of $20.2 billion to $20.4 billion. In the Productivity and Business Processes segment, they project revenue between $7.65 billion and $7.85 billion, including revenue from LinkedIn of about $950 million. In the Intelligent Cloud business segment, Microsoft estimates revenue of $6.45 billion to $6.65 billion. In the More Personal Computing segment, Microsoft estimates revenue of $9.05 billion to $9.35 billion.

Insider Take:

In the last year, Microsoft has taken some big steps to boost its bottom line. It minimized its reliance on Windows and Office, stripped itself of businesses that weren’t working (e.g., phones), and acquired partners like LinkedIn and Maluuba that complement Microsoft’s products and give the company competitive advantages. Microsoft also invested in cloud computing and took advantage of the subscription model for several of its product lines like Azure and Office 365 to build recurring revenue in place of perpetual licenses.It looks like fiscal year 2017 will be a good one for the tech company.

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