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Microsoft Q2 Exceeds Expectations

January 30, 2020

Microsoft reported results for the quarter ended December 31, 2019. The firm's earnings came in at $1.51 per share, excluding certain items with only $1.32 per share expected. The tech giant had revenue of $36.91 billion with investors looking for $35.68 billion.

“We are innovating across every layer of our differentiated technology stack and leading in key secular areas that are critical to our customers’ success,” said Satya Nadella, chief executive officer of Microsoft. “Along with our expanding opportunity, we are working to ensure the technology we build is inclusive, trusted and creates a more sustainable world, so every person and every organization can benefit.”

The following table reconciles our financial results reported in accordance with generally accepted accounting principles (GAAP) to non-GAAP financial results. Additional information regarding our non-GAAP definition is provided below. All growth comparisons relate to the corresponding period in the last fiscal year.

GAAP results include a net income tax charge related to the TCJA of $157 million for the second quarter of fiscal year 2019. This net income tax charge is excluded from our non-GAAP results.

Microsoft returned $8.5 billion to shareholders in the form of share repurchases and dividends in the second quarter of fiscal year 2020.

“Strong execution from our sales teams and partners drove Commercial Cloud revenue to $12.5 billion, up 39% year over year,” said Amy Hood, executive vice president and chief financial officer of Microsoft.

Revenue in Productivity and Business Processes was $11.8 billion and increased 17% (up 19% in constant currency), with the following business highlights:

  • Office Commercial products and cloud services revenue increased 16% (up 18% in constant currency) driven by Office 365 Commercial revenue growth of 27% (up 30% in constant currency)
  • Office Consumer products and cloud services revenue increased 19% (up 20% in constant currency) with continued growth in Office 365 Consumer subscribers to 37.2 million
  • LinkedIn revenue increased 24% (up 26% in constant currency)
  • Dynamics products and cloud services revenue increased 12% (up 15% in constant currency) driven by Dynamics 365 revenue growth of 42% (up 45% in constant currency)

Revenue in Intelligent Cloud was $11.9 billion and increased 27% (up 28% in constant currency), with the following business highlights:

  • Server products and cloud services revenue increased 30% (up 32% in constant currency) driven by Azure revenue growth of 62% (up 64% in constant currency)
  • Enterprise Services revenue increased 6% (up 7% in constant currency)

Revenue in More Personal Computing was $13.2 billion and increased 2% (up 3% in constant currency), with the following business highlights:

  • Windows OEM revenue increased 18% (up 18% in constant currency)
  • Windows Commercial products and cloud services revenue increased 25% (up 27% in constant currency)
  • Surface revenue increased 6% (up 8% in constant currency)
  • Search advertising revenue excluding traffic acquisition costs increased 6% (up 7% in constant currency)
  • Xbox content and services revenue decreased 11% (down 9% in constant currency)

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