News

Microsoft Finishes Q4 Strong, Beats Analyst Estimates

• By Scott Bekker
• July 19, 2016

Boosts in cloud revenue helped Microsoft beat analyst estimates on earnings per share and revenues for its fourth quarter earnings reported Tuesday, leading to a share-price increase of more than 3% in after-hours trading.

"I am pleased with the execution of our sales teams and partners this quarter who delivered a strong finish to the fiscal year," said Microsoft CFO Amy Hood in an earnings statement.

Microsoft reported earnings per share of 69 cents, beating analyst estimates of 58 cents per share, and revenues of $22.6 billion, compared to estimates of $22.15 billion. For Microsoft's full fiscal year, which ended June 30, the company reported revenues of $92 billion and earnings per share of $2.79.

"The Microsoft Cloud is seeing significant customer momentum and we're well positioned to reach new opportunities in the year ahead," said Microsoft CEO Satya Nadella in the statement.

For Microsoft's three broad business units, Productivity and Business Processes was up 5% to $7 billion, Intelligent Cloud was up 7% to $6.7 billion, and More Personal Computing was down 4% to $8.9 billion.

The headline cloud revenue figure for the quarter was 102% growth in Azure revenue, with Azure compute usage also doubling. Office 365 commercial cloud revenue was up 54%, while Microsoft now claims 23.1 million Office 365 consumer subscribers. Microsoft also reported that Dynamics CRM Online paid seats were up more than 2.5 times year-over-year.

Pushing the Enterprise Mobility Suite (which was recently renamed to Enterprise Mobility + Security) appears to have paid off, with customers nearly doubling year-over-year to 33,000 and a nearly 2.5x increase in the installed base.

While Surface revenues, including the Surface Book, were up by 9%, the biggest drop disclosure came in phone revenue, which fell by 71%. In a year in which Microsoft gave away free upgrades to Windows 10, Microsoft reported Windows OEM non-Pro revenue grew 27% and Windows OEM Pro revenue grew 2%.

During an earnings call with analysts Tuesday evening, Nadella and Hood expanded on the company's progress with cloud, saying the commercial cloud revenue run rate was in excess of $12.1 billion per year and on track to meet Microsoft's previously stated goal of a $20 billion run rate in fiscal year 2018.

"We are clearly one of the two enterprise cloud leaders," Nadella said in a reference to Amazon Web Services (AWS), which so far has dominated the cloud platform market with a market share exceeding all other competitors combined.

Nadella also cited momentum on the Office 365 side during the earnings call, saying that in the partner-led small and medium business (SMB) market, Microsoft now has nearly 90,000 customers, a 20% increase year over year.