Microsoft Reports Record FY14 Q1 Revenue of $18.53 Billion; Exceeds Expectations

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Microsoft today announced revenue of $18.53 billion for the quarter ended September 30, 2013. Gross margin, operating income, net income, and diluted earnings per share for the quarter were $13.42 billion, $6.33 billion, $5.24 billion, and $0.62 per share.

Microsoft stock is up over 7% in after hours trading.

These financial results reflect the deferral of $113 million of revenue primarily related to Windows 8.1 Pre-sales.

 

Three Months Ended

September 30,

Percentage Change

(In millions, except per share amounts and percentages)

Revenue

Operating income

Diluted EPS

Revenue

Operating income

Diluted EPS

2012 As reported (GAAP)

$16,008

$5,308

$0.53

 

 

 

Revenue deferred for Windows Upgrade Offer, Windows 8 Pre-sales, and Office Offer

$1,356

$1,356

$0.13

 

 

 

2012 As adjusted (non-GAAP)

$17,364

$6,664

$0.65

 

 

 

2013 As reported (GAAP)

$18,529

$6,334

$0.62

16%

19%

17%

Revenue deferred primarily related to Windows 8.1 Pre-sales

$113

$113

$0.01

 

 

 

2013 As adjusted (non-GAAP)

$18,642

$6,447

$0.63

7%

(3)%

(3)%

 

“Our devices and services transformation is progressing and we are launching a wide range of compelling products and experiences this fall for both business and consumers,” said Steve Ballmer, chief executive officer at Microsoft. “Our new commercial services will help us continue to outgrow the enterprise market, and we are seeing lots of consumer excitement for Xbox One, Surface 2 and Surface Pro 2, and the full spectrum of Windows 8.1 and Windows Phone devices.”

“We saw strong focus across our teams, generating record first-quarter revenue even as we navigate a fundamental business transition. Our enterprise renewals were very healthy and our devices and consumer business continued to improve,” said Amy Hood, chief financial officer at Microsoft. “We are making strategic investments in areas like technological innovation, supply chain management, and global cloud operations to build for the future and create long-term shareholder value.”

Devices and Consumer revenue grew 4% to $7.46 billion.

  • Windows OEM revenue declined 7%; Windows Pro revenue grew for the second consecutive quarter.
  • Surface revenue grew to $400 million with sequential growth in revenue and units sold over the prior quarter.
  • Search advertising revenue grew 47% driven by an increase in revenue per search and volume.

Commercial revenue grew 10% to $11.20 billion.

  • SQL Server revenue grew double-digits, with SQL Server Premium revenue growing more than 30%.
  • Lync, SharePoint, and Exchange, our productivity server offerings, collectively grew double-digits.
  • Commercial cloud revenue grew 103%.

“We continue to execute well across our businesses and we are seeing robust demand for our enterprise products and cloud services. Strong customer adoption of Office 365, Azure, and Dynamics CRM Online is accelerating our business transition to the cloud,” said Kevin Turner, chief operating officer at Microsoft. “Our investments in SQL database platform, Hyper-V, SystemCenter, and Lync are driving market share gains as these comprehensive solutions enable customers to increase their insight and efficiency.”

Webcast Details

Amy Hood, executive vice president and chief financial officer, Frank Brod, chief accounting officer, and Chris Suh, general manager of Investor Relations, will host a conference call and webcast at 2:30 p.m. PDT (5:30 p.m. EDT) today to discuss details of the company’s performance for the quarter and certain forward-looking information. The session may be accessed at http://www.microsoft.com/investor. The webcast will be available for replay through the close of business on October 24, 2014.

Adjusted Financial Results and Non-GAAP Measures

For the first quarter of fiscal year 2014, GAAP revenue, operating income, and diluted earnings per share included the deferral of $113 million of revenue primarily related to Windows 8.1 Pre-sales. During the first quarter of fiscal year 2013, GAAP revenue, operating income, and diluted earnings per share included the deferral of $1.4 billion of revenue related to the Windows Upgrade Offer, Windows 8 Pre-sales, and Office Offer.

Forward-Looking Statements

  • intense competition in all of Microsoft’s markets;
  • increasing focus on services presents execution and competitive risks;
  • our acquisition of Nokia’s Devices and Services business, may have an adverse effect on our business;

 Source: Microsoft

About Author

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

  • nohone

    No, no, no. This is all a lie. Microsoft is failing, they will be taking a $100 Billion dollar write down, will be going out of business in the next couple weeks, and Ballmer has admitted that Apple has won everything.

    • Bon Jovi

      Moron.

      • nohone

        Not sure if you got the sarcasm or if you are just a pathetic person.

        • Wtechrover

          Despite pretty obvious he did not get the sarcasm…

          • nohone

            You can never be sure

      • Shiva Prasad

        @Bon Jovi nohone is being sarcastic. :)

    • Wtechrover

      Great follow up on the isheep replies in ‘Reality Distortion Field: How Apple Assaulted Microsoft At Its Media Event’

    • whatup12

      Right–haven’t they heard that the company is stuck in the 80s and all of their products have already failed. WHY HAVENT THEY HEARD!

    • arrow2010

      MSFT headed to $0/share and $/0 market cap, $0 cash and out of business by Dec 31st, 2013!

  • HelloThisIsSteve

    Nice picture there lol

  • The1nChicago

    Would have been nice if MS had great news about the Surface 2 and Surface Pro launch in the tablet space. Unfortunately, I think the stock price will decrease tomorrow because I think Wall Street hates MS as well.

    • nohone

      This is their quarterly earnings statement. Preparing these documents take weeks to generate, in this case from Sept 23 – Oct 24. Giving status about Surface devices released two days ago would not be declared on documents prepared a month ago.

      • whatup12

        stores are sold out….it might be a stock issue in terms of them being timid not to over stock…but stores are sold out!

        • nohone

          Of the Surface 2, yes, they are. I tried two different MS stores on release day and they were sold out. But this article is about quarterly statements from last quarter, and they will not have information about Surface 2 or Surface Pro 2. Now they can give guidance on how they think it will sell over the next quarter, but with only two days of sales, there is not enough data samples to give any real indication of sales.

          • whatup12

            totally get that income reporting is delayed based on last quarter results though wall street may respond to these results combined with what they think is happening with sales…but yes, totally agree. just thought it might be prognostic of good things to come…though indeed, too early to be sure of anything.

        • NGM123

          MS wouldn’t be as stupid a second time around and get caught with too much stock. Sold out is good, but physical product would be very minimal this time around.

          • whatup12

            agree–MSFT still has stock even though it is not out at the stores. I get that they were gun shy here, but they really need to ride a fine line here between not being stuck with excess stock that needs to be firesold/given away/written off and not being able to meet demands. That said, the key is how is stock at places like best buy, etc–as if this is going to be a hit, this is where a lot of the stock will be sold. msft stores are limited in number and there are often more staff then customers inside…and that may change but likely demand has to be generated in the wild first.

  • nohone

    Something of interest about this, they made $400 million from sales of Surface in the quarter, with sales increasing. Over the past half a year Apple saw sales of iPads decrease, and the usual people said it was because a new one was about to be released. But when there is a new version of Surface about to be released, people bought more Surfaces (Surfi, whatever the plural of Surface is). Some of that is because of lower prices, but for a Device that has been touted as such a huge failure, an increase in sales with new devices around the corner is not what you would expect.

    • Bugbog

      I know my sis-in-law bought an RT a month before the announcement, even though I had warned her that a new [better] one was coming; couldn’t wait!

      • nohone

        It is tough when going up against an entrenched product with big mind share and the lead Apple has. iPad is a success, it is a good product, and it will be hard to win people over. But Microsoft is also putting out great product, and people are slowly, very slowly, looking at Surface rather than the iPad.

        • Bugbog

          Mindshare should never be underestimated. (Actually, in their latest reveal they have stated that iPad specific apps have reached 495K).

          My sis-in-law was actually looking for a notebook, and although I recommended the Surface Pro (as an outlier due to its expense), when she saw the Surface RT and had the fundamentals explained to her, the response I got back on her reasoning was: “it’s a tablet, it comes with Office and has the Type keyboard”

          She was all good to go! :)

          • nohone

            For the number of apps, I was looking at last years. They were both held on the same date but a year apart. So I removed that part.

          • whatup12

            yep, my mom replaced her laptop with the RT. and now with offline CRUD skydrive functionality, it will be even better. of course not enough productivity for 95% of us, but some may actually replace their machines with this eventually.

        • NGM123

          Hmmmmmmmmmm, a rational and sane comment.

          WTF is going on around here !!!!

      • SategB

        Just a quick reminder, Bug.

        There is nothing in this article about Surface Profits increasing, all it says is REVENUES was up $400 million. Subtract out O&M, S&M, and similar cost Profits are still allusive.

    • donzebe

      I never thought I could like a tablet until I bought a Surface.

    • arrow2010

      Apple iPad revenue for the quarter will be $9-$10 billion.

    • SategB

      While this is a better direction for sure, my concern is at $400 million and overly conservative Average Selling Price per Unit of $600, We are looking at only 600,000 to 700,000 units sold combined RT and Pro. If these numbers does not get a whole lot better, it is simple not sustainable.

      • Guest

        Interesting point, it makes me hesitant to buy a Surface with sales so low I am afraid they may just kill it off like the Zune and Window Phone 7 I bought.

  • David van der Zande

    I don’t understand the ‘adverse effects’ of the Nokia acquisition? Could someone explain this?

    • Ballack

      Nokia’ device division is still losing money (though loss is decreasing) and its gross margin is much lower than MS own divisions. This will lower MS margin, which is one of Street’s close focus on.

      • arrow2010

        Nope, not until the deal is approved in mid-2014.

    • Bugbog

      Adverse effects likely relate to the loss of the Licensing revenue from WP OEM’s (although that was already in the toilet anyway), and will present a greater obstacle to recruiting more OEM’s into the fold.

    • nohone

      Google is out over $16 Billion, including a $2.35 Billion write down, because they bought Motorola. Motorola recently released a phone that was supposed to make them profitable, but it was a failure. Nokia has been releasing phones that is keeping them near even, so there is a bit of risk, not as much a risk as Motorola was, but it still is.
      Oh, and Google’s write down? If $900 makes Microsoft a failure on a product that is growing, what does that make Google’s?

      • SategB

        It makes it a terrible business decision that is only allowed to happen because the company is making profits elsewhere…the same thing the Surface write down says.

        In both cases it is something shareholders and fans of the either company should find as complete defensible and vocally demand better from the company.

        • Zdenko

          You mean indefensible and I agree. As the old country saying goes “if your happy eating crap they will never give you caviar

  • tdog

    I am surprised every quarter by microsofts incredibly strong and always increasing financial earnings. I read so many negative press reports and comments by bitter and negative apple fanboys that I practically believe Microsoft is about to die like they say. I guess it is just hard to stay positive in a sea of haters. I for one don’t hold any grudge against apple, I just choose to use a system that is more functional and open.

    • NegLewis

      MS used to have 1 investor: BG.
      After he sold (unannounced) it’s stocks (well… actually before) loth of “0.1% investors” expressed their intention to torn MS apart and sell it …
      Those <1% investors are BIG Silicon Valley CEO's… they all need to break MS-Intel relationship.
      Starting with "media" like AOL, their sites, Engadget, … CNet… NewsPaper… they all thought that by bashing MS they will have a "nicer" offer from Apple or Google…. well they were wrong:
      Apple shares nothing.
      Google shares loses.

      NOW… they want MS back… but MS doesn't want it.
      BTW: BG has a$50 billion gun aimed at anyone who has the intention to split MS. After GB expressed his intention to come back and buy even more than 5%… NO ONE (from 20 top investors) said absolutely anything in media… EVEN AOL…

  • NegLewis

    Future has only one word in it: CLOUD.
    MS must concentrate on Azure too – allow me to buy a VM.
    Like SkyDrive is on cloud connected with my PC/Phone/Tablet… same with a SkyDesk should be.

    I want to buy a VM – a second screen on my tablet/Laptop/Phone where I will run my dayly apps/movies/Office.
    A desktop in the clouds where I install all my apps. I work, Compile my projects in 2 s using my 10 Virtual Cores … and 100 GB of RAM (on demand)…

  • Adrian

    I know it hurts blogs like Engadget, Technobuffalo, and the Verge to report this

  • SategB

    After doing some additional research (Analysis reports, channel checks, interviews) is most of the profits are coming from enterprise upgrade of Window. Great, except it is to Window 7 and is driven by the dislike of Window 8. This may communicate our short term success is resulting from a long term problem.

    In other words, as one generally Bullish analysis said to me, “Nice and sunny today, but some really dark clouds on the horizon”.

    • Guest

      Thanks for sharing your work. It supports my thoughts that it is time for MSFT stop distracting themselves with consumer products and focus itself on what it is great at: Enterprise

  • Matt

    Great news for Goldman $acks

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