Microsoft has released its second quarter earnings (first quarter calendar) with revenue of $24.1 billion GAAP, and $26.1 billion non-GAAP, Operating income was $6.2 billion GAAP, and $8.2 billion non-GAAP, Net income was $5.2 billion GAAP, and $6.5 billion non-GAAP, which results in EPS of .66 GAAP and .83 non-GAAP. This beats Wall St expectations that had the company’s projected revenue at $25.28 billion and $0.79 EPS.
Seeing as Microsoft has recently closed its acquisition of LinkedIn, the company is reporting that LinkedIn contributed $228 million in revenue but reported operating income of $(201) million and a net income of $(100) million. During the quarter, Microsoft returned $6.5 billion to shareholders in the form of share repurchases and dividends.
Revenue in the Productivity and Business Processes was $7.4 billion and increased 10% with Office commercial products and cloud services revenue increasing 5% thanks to Office 365 commercial revenue growth of 47%. Microsoft says that there are now 24.9 million consumers using Office 365 and that there are 65 million monthly active devices using Office on iOS and Android.
Intelligent Cloud was $6.9 billion which is an increase of 8% from the previous year with Azure revenue increasing 93%; Enterprise Services revenue dropped by 4%.
Microsoft’s More Personal Computing revenue decreased 5% to $11.8 billion, Microsoft states lower phone revenue is the primary driver of the decline, but Windows OEM revenue did increase 5% during the period. Gaming revenue decreased 3% for the period with the company saying hardware sales were down but software and service revenue growth did backfill some of this decline. During the period, Xbox Live active users climbed from 47 million in Q1 to 55 million in Q2.
Surface revenue saw a decline during the period by dropping 2% but this isn’t too surprising as the company primarily was selling the Surface Pro 4 and Surface Book which are older devices; Surface studio volume was low during the period. To little surprise, phone revenue was down 81% for the period.
Overall, Microsoft had a strong quarter with revenue topping estimates and EPS beating as well. With Azure revenue climbing 93% ($14 billion annual run rate) and the company saying that compute usages has doubled from a year ago, it shows that the company’s primary driver of growth (cloud/Azure), is still on a healthy upward trajectory.