Microsoft Q4 Earnings: Net income of $6.5 billion on $23.3 billion of revenue

Microsoft has released its Q4 earnings (Q2 calendar) and during that time period, the company brought in Net income of $6.5 billion on $23.3 billion of revenue. The diluted earnings per share was $0.83 with operating income of $5.3 billion.

Revenue in Productivity and Business Processes was $8.4 billion and increased 21% (up 23% in constant currency), with the following business highlights:

• Office commercial products and cloud services revenue increased 5% (up 6% in constant currency) driven by Office 365 commercial revenue growth of 43% (up 44% in constant currency)
• Office consumer products and cloud services revenue increased 13% (up 13% in constant currency) and Office 365 consumer subscribers increased to 27.0 million
• Dynamics products and cloud services revenue increased 7% (up 9% in constant currency) driven by Dynamics 365 revenue growth of 74% (up 75% in constant currency)
• LinkedIn contributed revenue of $1.1 billion during the quarter

Revenue in Intelligent Cloud was $7.4 billion and increased 11% (up 12% in constant currency), with the following business highlights:

• Server products and cloud services revenue increased 15% (up 16% in constant currency) driven by Azure revenue growth of 97% (up 98% in constant currency)
• Enterprise Services revenue decreased 3% (down 1% in constant currency) with declines in custom support agreements offset by growth in Premier Support Services

Revenue in More Personal Computing was $8.8 billion and decreased 2% (down 1% in constant currency) driven primarily by lower phone revenue, with the following business highlights:

• Windows OEM revenue increased 1% (up 1% in constant currency), slightly ahead of the overall PC market
• Windows commercial products and cloud services revenue increased 8% (up 8% in constant currency) driven by annuity revenue growth
• Surface revenue decreased 2% (down 1% in constant currency) mainly due to product lifecycle transitions
• Search advertising revenue excluding traffic acquisition costs increased 10% (up 11% in constant currency) driven by higher revenue per search and search volume
• Gaming revenue increased 3% (up 4% in constant currency) as strength in Xbox software and services offset lower hardware revenue

The key highlights here are that Azure continues to grow at a phenomenal rate for Microsoft and has for the last several quarters been growing at or near triple digit rates. It’s because of this strong growth that Microsoft’s stock price has continued to climb for the past several years even as other lines of business, like Windows, have shrunk from previous high water marks.

With the latest quarter, Microsoft’s annualized cloud run rate has surpassed $18.9 billion which means the company is well on its way to having $20 billion in annualized cloud revenue by June 30, 2018. As for all of fiscal 2017, the company brought in $90 billion in revenue.

The other driving factor for Microsoft is Office 365 growth with the consumer side now having 27 million customers and the corporate side growing at 44%, these are very strong indicators that this revenue line is continuing to expand as well. Also notable, the company said that Office 365 revenue, for the first time, surpassed that of traditional Office.

As of the time of this post, Microsoft’s stock price was up .49% in after-hours trading to $74.22 per share.