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Positive results for Microsoft, but Azure growth slows

25 Oct 2018

Microsoft has released the results for the quarter ended September 30 2018 – and it’s good news for shareholders.

The tech giant returned US$6.1 billion to shareholders in the form of dividends and share repurchases in the first quarter of fiscal year 2019, representing a surge of 27 percent when compared to the first quarter of fiscal year 2018.

The general numbers when compared to the corresponding period from last fiscal year are:

  • Revenue was $29.1 billion and increased 19 percent
  • Operating income was $10 billion and increased 29 percent
  • Net income was $8.8 billion and increased 34 percent
  • Diluted earnings per share was $1.14 and increased 36 percent

Microsoft CEO Satya Nadella says the company is happy with how the quarter went.

“We are off to a great start in fiscal 2019, a result of our innovation and the trust customers are placing in us to power their digital transformation,” says Nadella.

“We’re excited to help our customers build the digital capability they need to thrive and grow, with a business model that is fundamentally aligned to their success.”

Microsoft executive vice president and chief financial officer Amy Hood says they’ve seen great growth in cloud revenue.

“Our record results for Q1 reflect our commitment to long-term strategic investments and consistent execution to drive revenue growth and operating margin expansion,” says Hood.

“We see continued demand for our cloud offerings, reflected in our commercial cloud revenue of $8.5 billion, up 47 percent year over year.”

Breaking it down to sectors, Productivity and Businesses Processes brought in $9.8 billion of revenue, an increase of 19 percent. Highlights included:

  • Office commercial products and cloud services revenue increased 17 percent, largely driven by Office 365 commercial growth of 36 percent
  • Office consumer products and cloud services revenue increased 16 percent with continued growth in Office 365 consumer subscribers to 32.5 million
  • LinkedIn revenue increased 33 percent with record levels of engagement highlighted by LinkedIn sessions growth of 34 percent
  • Dynamics products and cloud services revenue increased 20 percent driven by Dynamics 365 revenue growth of 51 percent

Meanwhile, Intelligent Cloud revenue increased 24 percent to reach $8.6 billion, with highlights including:

  • Server products and cloud services revenue increased 28 percent driven by Azure revenue growth of 76 percent
  • Enterprise Services revenue increased 6 percent

And finally, revenue in More Personal Computing was $10.7 billion, an increase of 15 percent with the following highlights:

  • Windows OEM revenue increased 3 percent driven by OEM Pro revenue growth of 8 percent
  • Windows commercial products and cloud services revenue increased 12 percent driven by an increased volume of multi-year agreements
  • Gaming revenue increased 44 percent with Xbox software and services revenue growth of 36 percent mainly from third-party title strength
  • Search advertising revenue excluding traffic acquisition costs increased 17 percent
  • Surface revenue increased 14 percent

While 76 percent growth for Azure is certainly nothing to sneeze at, it’s the lowest growth rate in at least two years for Microsoft after falling from 89 percent in the previous quarter – something for the company to mull over.

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