Wrapping up its fiscal year 2020, Microsoft CEO Satya Nadella said the company’s Productivity and Business Processes and Intelligent Cloud segments saw an increase in cloud usage and demand with more people working from home during the pandemic. This contributed to the company’s $38.0 billion in total revenue for the fourth quarter, a 13% increase year-over-year. For the period ended June 30, 2020, Microsoft also reported operating income of $13.4 billion, an 8% increase. Net income for the quarter was $11.2 billion, or $1.46 per share, a decrease of 15% (GAAP).

“The last five months have made it clear that tech intensity is the key to business resilience. Organizations that build their own digital capability will recover faster and emerge from this crisis stronger,” said Nadella. “We are the only company with an integrated, modern technology stack – powered by cloud and AI and underpinned by security and compliance – to help every organization transform and reimagine how they meet customer needs.”

Fourth Quarter Fiscal Year 2020 Highlights

Other highlights from the quarter include:

• Revenue in Productivity and Business Processes was $11.8 billion, a 6% increase year-over-year.
• Office Commercial products and cloud services revenue was up 5%, primarily due to Office 365 Commercial revenue growth of 19%.
• Office Consumer products and cloud services revenue increased 6%.
• Microsoft now has 42.7 million Office 365 consumers, compared to 39.6 million at the end of the third quarter and 34.8 million a year ago.
• LinkedIn revenue increased 10% year-over-year.
• Dynamics products and cloud services revenue increased 13%, driven by Dynamics 365 revenue growth of 38%.
• Revenue in Intelligent Cloud was $13.4 billion, a 17% increase year-over-year, representing increased cloud usage and demand.
• Server products and cloud services revenue increased 19%, driven by Azure revenue growth of 47%, also representing increased cloud usage and demand.
• Enterprise Services revenue was flat for the quarter.
• Revenue in More Personal Computing was $12.9 billion, a 14% increase year-over-year, including a 7% increase in Windows OEM revenue, 9% increase in Windows Commercial products and cloud services, and a 65% increase in Xbox content and services.
• Surface revenue increased 28%, while search advertising revenue decreased 18%.
• Operating expenses for the quarter were $12.3 billion, a 13% increase. This included a $450 million charge for the closure of the Microsoft Store physical locations.

Though not noted in the financial report, Microsoft replaced dozens of jobs in editorial by using AI to aggregate news for Microsoft News, MSN and Microsoft Edge.

Fiscal Year 2020 Highlights

Financial highlights for the full fiscal year 2020 include:

• Revenue was $143.0 billion, an increase of 14% year-over-year.
• Operating income was $53.0 billion, an increase of 23% year-over-year.
• Net income was $44.3 billion, a 13% increase year-over-year, or $5.76 diluted earnings per share, a 14% increase (GAAP).

Product Improvements

In addition to these highlights, Microsoft released an 18-page list of product additions, improvements and new releases. Here are just a few.

• Through October 1, 2020, Microsoft 365 live events, which are hosted in Teams, Stream and Yammer, can support events up to 20,000 attendees and 16,000 hours in length.
• Microsoft Editor supports spelling and grammar checking in Word and Outlook.com in more than 20 languages.
• Microsoft Stream has a screen recording feature to help users create videos for remote learning, sharing, company updates, etc.
• Microsoft Teams has expanded the number of users viewable from four to nine. Also, earlier this week, Microsoft released the personal version of Teams for subscribers to Microsoft 365.
• Teams and Skype now work together.
• The company released a new update to Windows 10 in May with many new features.
• The Microsoft Edge browser has been updated to improve privacy and productivity.
• Through GitHub, developers can collaborate remotely using Visual Studio Live Share.
• Microsoft has many hardware and software improvements to Surface products.

Insider Take

Microsoft had a strong fourth quarter, wrapping up an excellent year. For the quarter, the company saw increases in virtually every category except net income and search revenue. Their cloud businesses remain strong, and Microsoft was able to contribute to the successful transition of working from the office to the home for countless businesses during the pandemic. Gaming revenue saw a significant increase, which can be attributed to record engagement during stay-at-home orders and popular third-party games. We expect to see more of the same, including increased cloud usage and demand, during the first quarter of Microsoft’s fiscal year 2021 which is already underway.