Microsoft Earnings Preview: Cloud, PC Trends Positive

Jeannie Matthews
July 21, 2018

Revenue from the company's Intelligent Cloud segment hit a record $9.6 billion for the quarter ended June 30.

Earnings per share of $1.14, versus $1.08 expected (GAAP). Dynamics 365 revenue grew by 61% (56% CC), and all Dynamics products and services grew by 11% (8% CC). Surface sales crossed $4.6 billion in FY18, while Windows Pro revenues rose by 14 percent.

"We had an incredible year, surpassing $100 billion in revenue as a result of our teams' relentless focus on customer success and the trust customers are placing in Microsoft", Microsoft CEO Satya Nadella gushed. "Our early investments in the intelligent cloud and intelligent edge are paying off, and we will continue to expand our reach in large and growing markets with differentiated innovation".

Intelligent cloud revenue was up 23 percent to $9.6 billion, with operating income up 34 percent to $3.9 billion.

Microsoft's revenue exceeded $100bn for the first time in fiscal year 2018, the company reported Thursday, as the legacy software company's efforts to reinvent itself as a major player in cloud computing continued to pay off.

The More Personal Computing group, which includes Windows, Surface and Xbox, was up 17 percent to $10.8 billion for the quarter ($42.2 billion for the year).

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Microsoft saw revenue gains across its full range of businesses including business services, gaming, Internet search ads, its consumer software including Windows and Office, and LinkedIn, the recently acquired professional social network.

Microsoft had fired several thousand employees a year ago as it announced a huge do-over in its sales strategy. The Surface business is up 25% from this time last year, something Microsoft credits to both a strong hardware lineup this year and a 2017 performance that set the bar lower.

Microsoft has announced technology partnerships with other major firms in recent months including General Electric, Starbucks, Bayer, Spain's Telefonica and sports organisations such as the National Basketball Association and PGA. Net income, meanwhile, was up 10 percent to $8 billion.

Microsoft had "very strong finish to its fiscal year", and "meaningfully" outperformed commercial cloud bookings expectations.

Gaming revenue increased 39% with Xbox software and services revenue growth of 36%.

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