Microsoft Q3 Earnings Results Beat Wall Street Expectations

Microsoft today announced revenue of $20.40 billion for the quarter ended March 31, 2014. Gross margin, operating income, net income, and diluted earnings per share for the quarter were $14.46 billion, $6.97 billion, $5.66 billion, and $0.68 per share, respectively.

 

  Three Months Ended March 31,
($ in millions, except per share amounts) 2013 As Reported (GAAP) Net revenue recognition for Windows Upgrade Offer, Office Deferral, and Video Game Deferral European Commission Fine 2013 As Adjusted (Non-GAAP) 2014 As Reported (GAAP) %Y/Y (GAAP) %Y/Y (Non-GAAP)
Revenue $20,489 ($1,658)       $18,831 $20,403 (0)% 8%
Gross Margin $15,702 ($1,658) $14,044 $14,462 (8)% 3%
Operating Income $7,612 ($1,658) $733 $6,687 $6,974 (8)% 4%
Diluted EPS $0.72 ($0.16) $0.09 $0.65 $0.68 (6)% 5%

 

“This quarter’s results demonstrate the strength of our business, as well as the opportunities we see in a mobile-first, cloud-first world. We are making good progress in our consumer services like Bing and Office 365 Home, and our commercial customers continue to embrace our cloud solutions. Both position us well for long-term growth,” said Satya Nadella, chief executive officer at Microsoft. “We are focused on executing rapidly and delivering bold, innovative products that people love to use.”

“We delivered solid, broad-based financial results driven by strong execution and continued cost discipline,” said Amy Hood, executive vice president and chief financial officer at Microsoft. “We are focusing our resources to drive growth and long-term shareholder value.”

Devices and Consumer revenue grew 12% to $8.30 billion.

  • Windows OEM revenue grew 4%, driven by strong 19% growth in Windows OEM Pro revenue.
  • Office 365 Home now has 4.4 million subscribers, adding nearly 1 million subscribers in just three months.
  • Microsoft sold in 2.0 million Xbox console units, including 1.2 million Xbox One consoles.
  • Surface revenue grew over 50% to approximately $500 million.
  • Bing U.S. search share grew to 18.6% and search advertising revenue grew 38%.

Commercial revenue grew 7% to $12.23 billion.

  • Office 365 revenue grew over 100%, and commercial seats nearly doubled, demonstrating strong enterprise momentum for Microsoft’s cloud productivity solutions.
  • Azure revenue grew over 150%, and the company has announced more than 40 new features that make the Azure platform more attractive to cloud application developers.
  • Windows volume licensing revenue grew 11%, as business customers continue to make Windows their platform of choice.
  • Lync, SharePoint, and Exchange, our productivity server offerings, collectively grew double-digits.

“Our products and services continue to deliver differentiated business value to our customers, and we continue to win share in areas like cloud services, data platform, and infrastructure management,” said Kevin Turner, chief operating officer at Microsoft. “Our SQL Server business grew double-digits again this quarter, and with the announcements of SQL 2014 and Power BI for Office 365, we offer a unique, comprehensive, end-to-end data and analytics solution.”

Nokia

Microsoft expects to close the acquisition of the Nokia Devices and Services business on April 25, 2014 (tomorrow).

About the author  ⁄ Suril Amin

Suril is a scientist, journalist and obsessive Microsoft observer. He holds an advanced degree in Biotechnology with minors in Biochemistry, Microbiology, and Molecular Biology. Send him tips on twitter: http://www.twitter.com/surilamin

  • eDameXxX

    Go go go MS!

    • SocalBrian

      Flat revenue and a decline in net income isn’t exactly “go go go” news,

      • Duk3togo

        Q3 of most businesses are flat since its usually a slow period for most industries. For a Q3 this is very nice numbers.

        • SocalBrian

          No it isn’t, we’re talking year-over-year comparisons here (as we should be), the only thing “nice” is that the drop wasn’t as bad as was feared.

          • http://twitter.com/surilamin surilamin

            I’ll be posting this soon, but profits are down mostly due to the $733 million fine from the EU.

          • SocalBrian
          • SaulWeinston

            Go play with your iPhone and STFU, ok?

          • Duk3togo

            YoY, Ok then remove all businesses they purchased… And the investments they made in their ecosystem and the investments in hardware… Because last year they took the loss in the 4th quarter on HW.

          • SocalBrian

            None of that changes the YoY comparison – and none really deserves to even be called out as exceptional (worthy of note in the financials).

            Not only that, but the EU fine that a lot of people here seem to think should be treated as exceptional and ignored actually happened last year Q3, not this year Q3. So, if we ignore it from last year’s numbers the YoY is even worse.

      • Emi the Strange

        please…. I know you want to feel smart replying about it but hey… if you think this isn’t still a “go go” news, I feel bad for you and how your brain works. still it’s good numbers for Q3.
        but of course these are bad numbers /s I’m sure your company (if you had one) got better numbers than MS.

      • nohone

        And yet when the fruit has sales of one of their biggest offerings drop %16, and nearly a year ago sales were down %14. There is nothing to worry about, because Apple has put all their eggs in one basket with another product.

        • Guest

          I don’t understand why everyone of your post has something about Apple or Google…are you a troll?

          • nohone

            It is called comparing and contrasting. The press likes to talk about how wonderful Apple is while talking as if Microsoft will collapse any day. One big tech web site, within minutes of Apple’s announcement (wonder if they had insider information) had wonderfully interactive charts detailing how many iPhones Apple sold while the only mention of iPad was a small blurb that was equivalent to “oh, and the iPad didn’t do so great”, and the link to that page was front and center with big and flashy graphics. Today after Microsoft’s announcement, there isn’t even a mention of Microsoft on that page.
            If the media refuses to report it, and instead like to promote one company while completely ignoring another one, then why not make these completely valid comparisons? Except for sites like this one, the rest of the media sure as hell won’t.

          • Guest

            You seem to work very, very hard to satisfy this confirmation bias you hold;
            In psychology and cognitive science, confirmation bias (or confirmatory bias) is a tendency to search for or interpret information in a way that confirms one’s preconceptions, leading to statistical errors.

          • nohone

            You seem to work very, very hard to attack me. But then again, you are most likely a Apple fanboy, I can tell because you are too much of a coward to log in with a name so that we can see your post history. You would also like to blame others for what you yourself are doing here. You are a typical, run of the mill Apple worshipper.

          • Guest

            Actually you talk more “Apple” then anyone here.

            You seem to be getting pretty worked up, maybe time for another little break?

          • nohone

            We know how it works, you don’t like to hear the opinions of others and rather than debate the merits of what I say you just want to shut down the argument. It is a common tactic among the Microsoft haters.

          • Guest

            Very sad that your unaware you are eem to be talking about yourself :(

          • Guest

            If you make statement rather then whine and play the victim, then you would have merits to discuss but currently I can only feel pity and hope some day your less angry about life.

        • SocalBrian

          Meh, Apple reported the better results – both revenue and income were up. The news coverage seems pretty fair.

          • nohone

            Only fair to the tiny fraction of Apple whores living in their fantasy world, but the real world runs on Microsoft.

          • SocalBrian

            Talk about people living in fantasy worlds…sheesh.

  • donzebe

    One step forward in all directions.

    • SocalBrian

      Well, except for revenue and income.

      • whatup12

        you must have lost a lot of money today…

        • SocalBrian

          Quite the opposite, although I don’t see how that is related to this discussion.

          • whatup12

            it just seems like you completely disagree with the market. i imagine you know better though…

          • SocalBrian

            The market is happy because they were expecting worse (and had already discounted the shares based on that). There is no disagreement – the numbers are the numbers.

          • whatup12

            Actually msft has sustained a high P/E ratio for a while (maybe excessively high) suggesting people think that it has promise. I saw the recent doom and gloom predictions on seeking alpha, but there is a reason those guys are writing for near-free on seeking alpha rather than the WSJ, etc. The market has been bullish on MSFT and while I don’t buy or trade stocks, the stock has been steady or growing for years. But indeed, numbers are numbers (that was helpful–thanks!!)

          • SocalBrian

            Their P/E is 14.7, nothing exceptional about that at all (although better than a year ago). Stock performance has also been pretty meh over the last 10 years but better recently. Probably good that you don’t buy or sell stock.

          • whatup12

            we can all check bing for instant stock quotes…good on yah! parents proud much?

          • SocalBrian

            Perhaps you should do more checking Before you comment. I confirmed the P/E before I replied but it didn’t take any checking to know what you were saying was untrue.

  • SategB

    Good news in general, Nadella is doing a good job cleaning the mess Ballmer left. Let’s hope he breaks out the numbers a bit more to see the real drag hardware is boing on the bottom line.

    • Zero

      Actually this is still Ballmer’s doing, Nutella [Nadella] ain’t done squat yet!

      • JeetVQ

        Nadella is kicking butt! Just goes to show what good things happen when you put an Intelligent Indian in charge rather then some fat dune white guy.

        • NGM123

          Racist pig

          • hushv

            There is a downvote button. Use it!

          • VeetVQ

            Nothing racist about it, simple descriptive;
            Nadella: Smart & Indian
            Ballmer: Fat, Dumb, & White

            I did not say all Indians are smart, not all Whites are fat and dumb. Just contrasting 2 particular individuals and in this case the Indian is found much superior, which is good for Microsoft. So the results of this comparison is not universal in natural for both race, even if it is vastly the preponderance.

          • Stefan

            The reason why your post is racist is because being Indian or white has nothing to do with how smart someone is, yet you said it as if it did.