Microsoft Announces Q4 Earnings; $4.97 Billion Profit On $19.90 Billion Revenue

Microsoft released its Q4 earning today (MS starts its fiscal year in July, think Q2 2013) with revenue of 4.97 on $19.90 in revenue giving an EPS (earning per share) of $0.59.  Microsoft took a $900 million (nearly $1 billion) charge on SurfaceRT due to a price reduction on the tablet and inventory adjustment on associated accessories.  If you exclude that charge MS would have had a $0.07 EPS increase ($0.65 EPS overall).

Regardless, Wall Street was extremely disappointed with the number and Microsoft’s stock tumbled nearly 7% (quite significant in terms of stock) in after hours trading.  The consensus among analysts was an EPS of $0.75 with almost $21 billion in revenue.  Unrealistic, yes, but expectations are expectations.

No GAAP (generally accepted accounting principles) numbers are:

Q4 Results

“While our fourth quarter results were impacted by the decline in the PC market, we continue to see strong demand for our enterprise and cloud offerings, resulting in a record unearned revenue balance this quarter. We also saw increasing consumer demand for services like Office 365,, Skype, and Xbox LIVE,” said Amy Hood, CFO”

Office 365 has in fact grown to a $1.5 billion annual business from $1 billion a few months back.  Microsoft Business Division revenue grew 14% for the fourth quarter and 3% for the full year. Server & Tools revenue grew 9% for the fourth quarter and 9% for the full year, driven by double-digit percentage revenue growth in SQL Server and System Center. Windows Division revenue grew 6% for the fourth quarter and 5% for the full year.

Windows Division revenue decreased 6% for the fourth quarter and 1% for the full year. Online Services Division revenue grew 9% for the fourth quarter and 12% for the full year, driven by an increase in revenue per search and volume. Bing organic U.S. search market share was 17.9% for the month of June 2013, up 230 basis points from the prior year period.  Entertainment and Devices Division grew 8% for the fourth quarter and 6% for the full year. During the quarter, revenue within Xbox LIVE grew nearly 20%.

Overall for fiscal year 2013, earnings per share were $77.85 billion, $26.76 billion, and $2.58 per share. These numbers include the $733 million European Commission fine regarding browser ballot choice.

While the numbers for the year are decent, Wall Street looks for growth, and there is not significant growth in these numbers.  We’re still in the transitional phase in Microsoft becoming a devices and services company, and combined with a sluggish economy I see the next fiscal year being similar to this one.

  • Rikkirik

    Microsoft share has eisen more than 40% recently. I guess Wall Street is never satisfied. But MS is doing a good job and should not wordt it’s head with shareholders.

    • XBoXer

      Wall Street should not be satisfied!!!!

      The MS leadership last quarter wiped out $6 BILLION in shareholder wealth with the write off from a bad acquisition and this quarter another near Billion dollars with the Surface RT write off.

      That is close to 2% of the stock value in 2 quarters. Add that to the fact the company has no mobile strategy, PC sales has seen the longest drop is sales ever, it’s biggest money maker the Windows OS new version is selling poorly while the CEO seems clueless, Wall Street should be more then unsatisfied they should be pissed and wanting Balmer’s head.

      • arrow2010

        Actually $40 billion in shareholder wealth GONE just like that.

    • guessed

      All of the rise since last earnings was due to increasing expectations. I’m not really sure why, since I haven’t seen a lot of good news about MS over the quarter, and some bad news (xbox one backlash, dying PC market, NSA problems, etc). So the pull-back today was a reality check, indicating that those expectations and accompanying rise was false.

      It’s not like Wall Street got a 40% bonus and cashed it in and then said “we’re going to throw a tantrum because we want more!” Instead, it’s more like they speculated too much, inflating their sense of the worth of MSFT beyond reality, and now finally realized their delusion. All that disappeared was the imaginary money that grew over the past 3 months. Un/fortunately for investors trading on that imaginary money using their real money, some people bought the speculation and some people sold it.

  • Yuan Taizong

    Wall Street-Logic: If a large company only makes a few billion dollards profit, it means overall loss.
    All divisions seem to be doing well, I bet Microsoft SkyDrive, Microsoft Office 365, Microsoft Windows Azure and most cloud-services experienced most growth, Xbox LIVE is also kinda a Cloud-service (at-least it contains a few thousand of those within as various games), Microsoft may not make large profits today, but by the end of 2014 when all will be moving from XP into the Cloud and when ”the Cloud” will be so mainstream it’ll be in EVERYONE’s daily Vocabulary, Microsoft’s every service (most notably SkyDrive) in this technological expension shall be billion dollar businesses, of-course the speed of which could be excellerated with Windows 8, but Windows Vista & 7 are as capable of hosting these apps, unfortunately, Windows 7 doesn’t invite people to Microsoft SkyDrive by default.

    Major improvements to Windows 8 as Windows 8.1 (Blue) shall probably boost the Mobile sales, but desktops will probably continue to decline, but Windows may dominate desktops, but desktops soon will stop dominating Windows’ profit margins. Nokia’s new Nokia Lumia 1020 will probably conquer an entire niche market, but won’t probably become mainstream (although I hope it will) and Windows Phone will see an improvement in its stagnation (very slow growth), Windows Phone 8 already gains a larger and larger marketshare in many non-U.S. markets, most notably India, and depending on negative press on Apple, China might come too.

    Windows Azure is quite wanted international, the Xbox One, despite the fact that it’s the most hated thing on the internet, it’s one of the most wanted things in video-game-stores, and Yammer is also gaining ground as it integrates into Microsoft Office.