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Microsoft’s Q4 earnings beat with $22.6B in revenue, $0.69 EPS

ICE Graveyard 19/07/2016 Frederic Lardinois

Microsoft today reported earnings for its fourth fiscal quarter of 2016, its first earnings report after announcing its proposed acquisition of LinkedIn. The company’s earnings came in at a non-GAAP revenue of $22.6 billion and $0.69 of non-GAAP per-share profit and were well above expectations.

Wall Street expected the company to report earnings per share of $0.58 on revenue of $22.14B.

The company’s stock was trading up 3.5 percent right after the earnings were announced.

In the year-ago-quarter, Microsoft’s revenue was $22.2 billion, but earnings per share came to a $0.40 loss because of the $7.5 billion charge Microsoft took related to its acquisition of Nokia. Without the charge, the company’s earnings per share would have been $0.62.

“This past year was pivotal in both our own transformation and in partnering with our customers who are navigating their own digital transformations,” said Satya Nadella, chief executive officer at Microsoft. “The Microsoft Cloud is seeing significant customer momentum and we’re well positioned to reach new opportunities in the year ahead.”

Like in previous quarters, analysts will be especially interested in Microsoft’s cloud revenue. In its Q3 report, Microsoft said revenue from its “Intelligent Cloud” business had grown to $6.1 billion, up 3 percent (or 8 percent in constant currency). Azure revenue had grown 120 percent year-over-year while its server products and cloud services revenue had increased 5 percent. This quarter, Intelligent Cloud revenue hit $6.7 billion and Azure revenue grew 102 percent year-over-year.

Microsoft has long said that it expects its commercial cloud business to hit a $20 billion run rate by 2018. In Q3, it reported that its run rate was $9.4 billion. With this new report, that number has now hit $12.1 billion.

Here is a breakdown of Microsoft’s numbers for its other business units:

Productivity and Business Processes (this includes Office, consumer Office, and Dynamic, among other products): $7.0 billion, compared to $6.3 billion in revenue in the last quarter. Microsoft attributes this to strong growth across its productivity services and especially the fact that Office 365 commercial revenue grew 54 percent and that its Dynamics CRM paid seats are growing at more than 2.5x year-over-year.

More Personal Computing (including Windows, Devices, Gaming and Search): $8.9 billion in revenue, compared to $12.7 billion in the last quarter. Phone revenue, unsurprisingly, declined 71 percent, but the company’s revenue from its Surface line continues to increase and was up 9 percent in the last quarter (mostly driven by the Surface 4 and Surface Book).

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