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Microsoft Reports $45.3B in Revenue for Q1 FY22, Driven by Cloud Services Revenue

Surpassing $20 billion in Microsoft Cloud quarterly revenue for the first time

Microsoft’s fiscal year 2022 is off to a great start! In their first quarter fiscal year 2022 financials, the tech giant reported revenue of $45.3 billion, an increase of 22% year-over-year. The company had net income of $20.5 billion (GAAP), a 48% increase year-over-year, and diluted earnings per share of $2.71, a 49% increase year-over-year, beating analysts’ estimates, says CNBC.

Microsoft’s growth was driven by growth in cloud services revenue. In the first quarter of fiscal year 2022, Microsoft Cloud revenue was $20.7 billion, exceeding $20 million in quarterly revenue for the first time. This increase represented growth of 36% year-over-year.

“Digital technology is a deflationary force in an inflationary economy. Businesses – small and large – can improve productivity and the affordability of their products and services by building tech intensity,” said Satya Nadella, Microsoft chairman and CEO, in an October 26, 2021 news release. “The Microsoft Cloud delivers the end-to-end platforms and tools organizations need to navigate this time of transition and change.”

Other quarterly highlights include:

  • Revenue in Productivity and Business Processes was $15.0 billion, a 22% increase year-over-year.
  • Office Commercial products and cloud services revenue increased 1%, driven by Office 365 Commercial revenue growth of 23%.
  • Office Consumer products and cloud services revenue increased 10% and Microsoft 365 Consumer subscribers increased to 54.1 million, compared to 51.9 million at the end of fiscal year 2021.
  • LinkedIn revenue increased 42%, driven by the Marketing Solutions subscription service which grew 61%.
  • Dynamics products and cloud services revenue increased 31%.
  • Revenue in Intelligent Cloud was $17.0 billion, a 31% increase.
  • Server products and cloud services revenue grew 35%, driven by Azure and other cloud services revenue which grew 50%.
  • Revenue in More Personal Computing was $13.3 billion, an increase of 12%.
  • Windows OEM revenue increased 10%.
  • Windows Commercial products and cloud services revenue increased 12%.
  • Xbox content and services revenue increased 2%.
  • Search and news advertising revenue, excluding traffic acquisition costs, grew 40%.
  • Surface revenue is the only category that saw a decrease in revenue. It was down 17% for the quarter.

Outlook for Q2 FY22

By business segment, Microsoft provided the following guidance for the second quarter:

  • Productivity and Business Processes: revenue between $15.7 billion and $15.95 billion
  • Office Commercial: revenue growth will be driven by Office 365; on-premises revenue will decrease in the high-teens as customers move to the cloud
  • Office Consumer: revenue will grow in the mid-teens
  • LinkedIn: revenue growth in the mid-30% range, driven by a strong job market and high engagement
  • Dynamics: growth will be similar to Q1 FY22
  • Intelligent Cloud: revenue between $18.1 billion and $18.35 billion
  • Enterprise Services: revenue growth will be in the high single digits
  • More Personal Computing: revenue between $16.35 billion and $16.75 billion
  • Surface: revenue will continue to drop
  • Search and news advertising: revenue growth in the low to mid-20s

“In closing, we are off to a strong start in FY22 with tremendous opportunity to drive sustained, long-term revenue growth. We remain focused on growing high value usage across our differentiated Microsoft cloud offerings and delivering exciting new consumer experiences with Windows 11, Surface, and our Xbox gaming platform as we enter the holiday season. Our consistent approach to investing for these and other future opportunities, while continuing to deliver solid operating performance, will drive strong results throughout FY22 and beyond,” said Amy Hood, CFO, on the earnings call.

Insider Take

Microsoft reported another stellar quarter, showing revenue increases in every category, except for Surface. Cloud services, of course, were the big highlight, which is good because supply chain issues have impacted product sales. Other highlights in the quarter included the acquisition of CloudKnox Security and RiskIQ to help strengthen cybersecurity as more companies transition to the cloud and hybrid work continues. Microsoft’s fiscal year 2022 is off to a solid start with more good things to come.

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