Microsoft Reports Net Income of $8.9 Billion for FY18 Q4

CEO attributes results to Microsoft Cloud and the company's focus on customer success.

Subscription News: Microsoft Reports Net Income of $8.9 Billion for FY18 Q4

Source: Microsoft

Last week Microsoft (NASDAQ: MSFT) reported a strong fourth quarter for its fiscal year 2018 ended June 30, 2018. The company earned revenue of $30.1 billion, a 17 percent increase year-over-year, and net income of $8.9 billion (GAAP), or $1.14 diluted earnings per share. CEO Satya Nadella attributed the company’s results to Microsoft Cloud, his teams’ “relentless focus on customer success” and customer trust in the company and its products and services.

“I’m proud of our strong results this quarter and even more proud of what we have accomplished over the last 12 months. We delivered more than $110 billion in revenue for the full year with double digit topline and bottom line growth,” Nadella said in the July 19 earnings call. “And our commercial cloud business surpassed more than $23 billion in revenue for the year with gross margin expanding to 57 percent.”

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“The strength of our results reflects accelerating innovation and the trust customers are placing in us to power their digital transformation,” Nadella added.

Additional highlights from the quarter include:

  • Revenue from Productivity and Businesses Processes was $9.7 billion, a 13 percent increase.
  • Office commercial products and cloud services revenue was up by 10 percent, driven by Office 365 commercial revenue growth of 38 percent.
  • Officer consumer products and cloud services revenue grew by 8 percent and Office 365 consumer subscribers grew to 31.4 million.
  • LinkedIn revenue increased 37 percent, while engagement in sessions grew 41 percent.
  • Revenue in Intelligent Cloud was $9.6 billion, a 23 percent increase.
  • Server products and cloud services revenue increased 26 percent, and Enterprise Services revenue grew 8 percent.
  • Revenue in More Personal Computing was $10.8 billion, a 17 percent increase.
  • Windows commercial products and cloud services revenue increased 23 percent.
  • Gaming revenue jumped 39 percent with Xbox software and services revenue growth of 36 percent, primarily from third-party titles.
  • Surface revenue increased 25 percent, and search advertising revenue, excluding traffic acquisition costs, increased 17 percent.
  • There are now more than 135 million users of Office 365 commercial.
  • Outlook mobile is being used on more than 100 million iOS and Android devices.
  • More than 200,000 organizations use Microsoft Teams as a hub.
  • Windows 10 is active on close to 700 million devices.
  • LinkedIn now has more than 575 million members.

Highlights from the full fiscal year include the following:

  • Revenue of $110.4 billion, a 14 percent increase year-over-year
  • Operating income of $35.1 billion, a 21 percent increase year-over-year
  • Net income (GAAP) of $16.6 billion
  • Diluted earnings per share (GAAP) of $21.13

Amy Hood, Microsoft’s chief financial officer, provided the following outlook for the first quarter, excluding any impact from the acquisition of GitHub:

  • Revenue for Productivity and Business Processes will range between $9.25 billion and $9.45 billion with double-digit growth.
  • Revenue for Intelligent Cloud will range between $8.15 billion and $8.35 billion.
  • More Personal Computing revenue will range between $9.95 billion and $10.25 billion.

Investors didn’t react significantly to the financial results, with stock closing at $104.40 per share the day results were announced, compared to $108.22 as of 10:48 a.m. EDT yesterday.

Subscription News: Microsoft Reports Net Income of $8.9 Billion for FY18 Q4

Source: Microsoft

Insider Take:

One of the reasons Microsoft’s financials remain strong is because the company never stays stagnant. It is always pushing the envelope, looking for new opportunities and acquisitions, and innovating to be a leader in the tech industry. When it realizes something isn’t working (e.g., phones), it gets out. When it realizes something offers a possible opportunity (e.g., gaming), the company doubles down and invests. These types of changes along with the recent restructuring to focus on cloud services will continue to fuel growth for this Redmond, Washington-based company.