Microsoft financials

2024: Revenue growth by 15% to $245 billion Windows brings in less than 9%

Over the past 10 years, Microsoft's expansion has been driven solely by services and cloud technologies, while products have stagnated.

Products mean software and hard, which does not imply periodic payments. For example, an Office or Windows key is a product, but a one-year Office 365 subscription is a service. Microsoft also tried to actively perform in the device market, but did not succeed in this.

Xbox Series X and Series S, Surface Devices (a whole series of them there), Surface accessories are products, and Xbox Game Pass is a service.

So, annual revenue (fiscal year ends in Q2) for products in 2Q 2016 in the amount of 12 months was 67.3 billion, and after 8 years by 2Q 2024 revenue decreased to 64.8 billion, while for services revenue soared from 23.8 to 180.4 billion and continues to grow actively by 22.5% y/y, but this is below the average annual rate + 32% in 2017-2022.

Do you think Microsoft's core business is from selling Windows? This is the most depressed segment in Microsoft's structure. In 2010-2014, the average revenue from the sale of Windows to individuals + corporate clients around the world was 17-18 billion, and now 21-22 billion, this is less than 9% of revenue, and 10-12 years ago Windows generated a quarter of revenue, and 20 years ago more than 40%.

• Quarterly revenue in 2Q24 increased by 15% to 64.7 billion (record), for the year - 245 billion (+ 15.7% YoY).

• Operating profit increased by 15% to 27.9 billion (record), for the year - 109.4 billion (+ 23.6% YoY).

• Net profit rose 10% to 22 billion, below the record of 3q23, but the best result in history for Q2, for the year - 88.1 billion (+ 21.8% YoY).

• Operating cash flow increased by 29% to 37.2 billion (record), for the year - 118.5 billion (+ 35.3% YoY).

• Net byback + dividends amounted to 9.2 billion vs 10.2 billion a year earlier, for the year - 38.6 billion (a decrease of 28%!).

• Capital expenditures reached a staggering 13.9 billion, which is almost 1.6 times more than 2q23, over the year - 44.8 billion (+ 60% YoY).

Business is growing due to cloud technologies, the AI factor is still blurred.

Microsoft reports, like Google, are very important, because it is these two companies that are direct providers to the AI world, providing the most developed infrastructure at the hardware and software level.

The direct effect GIYA on Microsoft's capital expenditures is about $20 billion per year - an excessive expansion of capital expenditures compared to the period before the hype GII in 2021-2022.

Microsoft used to focus on products and now on services. 10 years ago, capital expenditures were only 4.5-5.5 billion, increased to 23-25 billion in 2021-2022 and now exceeded 45 billion with growth potential to 55-60 billion in the near future.

20 billion expansion of capex from 2014 to 2022 is the cost of integrating IT infrastructure for cloud services, and another 20-30 billion from above is already a GII factor. Colossal money, but as in the case of Google, there was a suspicious silence on AI.

So far, the GII is an extremely expensive toy that generates only losses, and the only direct beneficiary is manufacturers of equipment such as nVidia.

A unique feature of the GII is the extremely high entry threshold - it is like a flight into space half a century ago or a nuclear weapon, available only to a select few.

You cannot assemble a data center from a couple of dozen Nvidia A100 worth $10 thousand each and self-teach the neural network on your knee - nothing will work.

There is an effect of nonlinear expansion of AI "cognitive abilities" when learning on ultra-large arrays of information, when at a certain threshold unique AI self-learning abilities are manifested. The essence of this effect is that when a certain amount of data and complexity of the model is achieved, the AI system begins to demonstrate unexpected abilities that were not clearly embedded in it during training.

But this requires tens and hundreds of thousands of Nvidia A100 and billions of dollars for algorithm creation and self-learning, otherwise the model will remain uncompetitive. This determines the entry threshold.

At the same time, the ultimate usefulness of the GII remains very controversial regarding the expectations assigned to it "dividing the world into BEFORE and AFTER GII" and all these crazy investments. In certain tasks, a useful toy, but globally does not change anything yet, wrote Spydell Finance.

Neither Google nor Microsoft have presented any numerical metrics to assess the scale and depth of integration in AI and, moreover, they move away from direct questions, limiting themselves to the general phrases "faith in the bright future of AI and the strategically correct path." Rather, yes than no, but where is the specific effect or even the prediction of AI integration?

Microsoft has all two areas of monetization of the newfangled toy - this is GitHub Copilot, where in 2024 revenues from Copilot can amount to $800 million and this is revenue, there is no information on profit.

Copilot for Microsoft 365, where there are no numbers at all. It is reported that the number of Copilot customers increased by more than 60% compared to the previous quarter, but it was in the previous quarter that the start point and the introduction of this thing. If so, this is a complete failure, because on a zero base + 60% with 83 million client base Microsoft 365 is very weak.

The number of customers with more than 10 thousand seats more than doubled in the quarter. 50 thousand organizations used Copilot Studio, increasing the number by 70% in the quarter.

There were no specific numbers named, which unambiguously interprets as a weak start/failure, because otherwise in the presentation the GII would have been the first thing to do, but even in the press release there was not a word about the GII.

The situation is similar, as with Google - there is nothing to say, nothing to boast about. There are many words how AI will be integrated into all significant products, but no one shows a commercial effect.

Given the weak adoption by the corporate segment and mainly negative reviews of the consumer segment, Copilot's revenue will reach no more than 0.7-1 billion with aggressive PR, an established dealer network and a customer base.

2023

Code writing assistant brings big losses to Microsoft

In early October 2023, it became known that Microsoft was losing up to $80 a month on each user of GitHub Copilot, an artificial intelligence-based service designed to help developers Visual Studio Code, Visual Studio, Neovim and JetBrains complete the program code. Thus, this tool, jointly developed by GitHub and OpenAI, brings significant losses to the Redmond corporation. Read more here.

In the list of companies with the largest R&D costs

2022

Increasing R&D costs

Revenue Dynamics by Direction

$132 billion cash on balance sheet

3rd in the world in terms of capitalization

2021

1st in the world among ICT developers by revenue

According to Synergy Research Group, the total revenue of the 13 largest manufacturers of software and ICT services for business, including telecom operators, reached $613 billion in this market in 2021, which is 10% more than a year earlier. Microsoft was ranked 1st on this list.

Revenue - $168.09 billion, profit - $61.27 billion

At the end of fiscal 2021, Microsoft raised $168.09 billion against $143.02 billion a year earlier.

Most of the sales came from the cloud division of Microsoft Intelligent Cloud, which earned $60.08 billion in revenue over the year, while in 2020 it was $48.37 billion.

Revenues in the direction of Productivity and Business Processes increased from $46.4 billion to $53.92 billion, in the More Personal Computing division the indicator increased from $48.25 billion to $54.09 billion.

It also follows from the Microsoft report that by the end of June 2021, the Microsoft 365 Consumer product had 51.9 million subscribers, which is 22% more than a year earlier. The audience of the Microsoft Teams corporate messenger exceeded 250 million active users per month. The share of premium E5 accounts in the total number of commercial Office 365 subscribers was 8%. The social network LinkedIn brought the corporation about $10 billion in annual revenue.

In the direction of Microsoft server products, which include the Windows Server operating system and SQL Server DBMS, revenue rose 16% year-on-year. In this case, the low indicators of 2020 of the financial year, which were the result of the COVID-19 coronavirus pandemic, greatly influenced.

The negative impact of the pandemic was manifested in Microsoft's gaming business, but in other markets (for example, in the cloud) this factor, on the contrary, turned out to be positive.

Microsoft's net profit in fiscal 2021 amounted to $61.27 billion, which is significantly more than a year ago (about $44.28 billion).

On the day of publication of the financial statements (July 27, 2021), Microsoft stock quotes at additional trading decreased by Microsoft%. Since the beginning of 2021, Microsoft's capitalization has jumped by 28.6% to $2.18 trillion.^[1]

Microsoft capitalization reached $2 trillion for the first time

On June 22, 2021, Microsoft's market capitalization for the first time reached $2 trillion. dollars. Microsoft became the third company to achieve this indicator.

The value of the Saudi oil state-owned company Saudi Aramco exceeded this mark in December 2019. According to Bloomberg, it is now worth about $1.9 trillion.

Apple's capitalization reached $2 trillion in August 2020. Now it is about $2.32 trillion, follows from the Nasdaq data.

Since the beginning of 2021, Microsoft shares have risen in price by 19%, overtaking Apple and Amazon in this indicator. Microsoft's third-quarter earnings, released in April, beat market expectations and showed strong growth for the company across a wide variety of business segments.

Fourth place in the list of most visited sites

2020

Microsoft revenue in the information security market rose by 40%

In 2020, Microsoft earned more than $10 billion in revenue in the information security market, which is 40% higher than a year ago. This growth in the company was associated with a surge in cyber threats in the context of the COVID-19 coronavirus pandemic, in which many companies were forced to reconfigure their computer systems for remote work.

Speaking of annual sales of $10 billion, Microsoft had in mind such areas of business as security, compliance, identity protection and access control. The company also noted the following results of its work in the market under consideration in 2020:

• blocking almost 6 billion malicious threats using the Microsoft Defender service. The solution protects iOS, Android, macOS and Linux;
• daily processing of more than 8 trillion signals received from various Microsoft platforms and services about potential threats;
• an increase of 9 thousand per year in the number of customers using the Azure Sentinel platform. The solution helps protect workflows in the cloud, including on AWS and Google Cloud Platform;
• The Azure Active Directory cloud identification solution has become available to 425 million users;
• Microsoft's payment of $13.7 million in a reward for finding vulnerabilities to 327 researchers from more than 55 countries;
• The Microsoft Intelligent Security Association, a community of more than 175 partner companies, has implemented more than 250 integrations with Microsoft products and services in 2020.

Microsoft's security investments in recent years have turned the corporation into a major competitor to niche information security firms specializing in areas such as email security and identity management, according to cyber analyst Alex Henderson of investment bank Needham Group.^[2]

Revenue growth of 14% to $143.02 billion

Microsoft's revenue for the 2020 fiscal year, which ended at the end of June 2020 calendar, reached $143.02 billion, which is 14% more than a year ago.

Sales of the American corporation increased largely due to the cloud business, for which the Microsoft Intelligent Cloud division is mainly responsible. It also includes various enterprise services, the GitHub collaborative IT project development service, Windows Server and SQL Server operating systems.

In 2020, the revenue of Microsoft Intelligent Cloud amounted to $48.37 billion against $38.99 billion a year earlier. The company did not disclose Azure's revenue and only noted that in the segment of corporate cloud services, annual revenues exceeded $50 billion.

According to the results of 2020, annual revenue in the Productivity and Business Processes division reached $46.4 billion, increasing from $41.16 billion in 2019. In the direction of More Personal Computing, turnover growth was also registered - from $45.7 billion to $48.25 billion.

Microsoft's net profit rose 13% - from $39.24 billion in fiscal 2019 to $44.28 billion a year later. This happened largely due to the receipt of a one-time tax benefit in the amount of $2.6 billion. At the same time, the company also incurred expenses related to taxation ($157 million). In addition, Microsoft spent $450 million due to the closure of its retail stores.

As financial results showed, the COVID-19 pandemic not only did not hit Microsoft's business, but also contributed to its growth. This situation became possible because. that the outbreak of coronavirus has led to a surge in demand for cloud tools for remote work and remote equipment. Such solutions are offered by the American corporation.^[3]

2019: Revenue growth 14% to $125.8 billion

In fiscal 2019, Microsoft raised $125.8 billion, an increase of 14% compared to 2018. The main catalyst for the financial growth of the company remains the cloud business.

The Intelligent Cloud division responsible for it for the 12-month reporting period ended June 30, 2019 calendar year, registered a turnover of $39 billion against $32.2 billion a year earlier.

The Productivity and Business Processes division (Office    and Office 365 office applications, as well as customer relationship management systems  Dynamics CRM) received revenue of $41.2 billion at the end of the 2019 financial year. A year earlier, revenues here were measured at $35.9 billion. By the end of June 2019, the number of Office 365 users in the consumer sector reached 34.8 million.

In the More Personal Computing division (among other things, it is responsible for selling  licenses to Windows and brings Microsoft most of the revenues), annual revenue increased from $42.3 billion to $45.7 billion. Mike Spencer, head of investor relations at Microsoft, attributed this rise to the replacement of Windows 7 with Windows 10 by consumers and companies, as well as the fact that some computer manufacturers began to increase inventory of equipment in the run-up to a possible increase in duties. Spencer noted that Microsoft did not feel any influence from US sanctions against Huawei.

Microsoft's net profit in fiscal 2019 was $39.2 billion, which is 137% more than a year ago.

On the day of the publication of Microsoft's annual reports, the company's quotation rate increased by 2.66% and exceeded $140 (record result) in electronic trading after the exchange closed. The market capitalization of the software giant reached $1.05 trillion. ^[4]

2018

Revenue growth in the segment of software platform solutions based on AI by 139.4%

Revenue growth by 14% to $110.4 billion

For the 2018 fiscal year, the end of which fell on June 30, 2018 calendar, Microsoft revenue amounted to $110.4 billion, an increase of 14% compared to the previous year.

The annual revenue of the More Personal Computing division (among other things, responsible for the sale of  Windows licenses and brings Microsoft most of the revenue) increased from $39.2 billion to $42.3 billion. In the Intelligent Cloud group (server and cloud solutions), revenues rose from $27.4 billion to $32.2 billion.

Productivity and Business Processes (office  applications Office  and Office 365, as well as customer relationship management systems  Dynamics CRM) ended the reporting year with revenue of $35.9 billion, which is about $6 billion more than a year ago. By the end of June 2018, the number of Office 365 users in the consumer sector reached 31.4 million.

Microsoft's net profit in fiscal 2018 fell to $16.6 billion, largely due to one-time expenses of $13.7 billion related to the tax reform in the United States. In addition, the American software giant spent $306 million to restructure sales and marketing.

On the day the results of the work were published in fiscal year 2018, Microsoft quotes increased by more than 4%. This was due to the fact that the company's revenue was higher than analysts' expectations. Since the arrival of Satya Nadella as CEO of the corporation in 2014, its shares have risen in price by 180% by July 19, 2018, and the market capitalization in July 2018 for the first time exceeded $800 billion.

{{quote 'Our early investments in Intelligent Cloud and Intelligent Edge are beginning to pay off. We will continue to expand our capabilities in large and growing markets through differentiated innovation, Nadella said in a press release. ^[5]

The cost of Microsoft for the first time exceeded $1 trillion

On April 24, 2019, Microsoft's capitalization for the first time in the history of the corporation exceeded $1 trillion. Shares of the software giant rose in price after the publication of financial statements: Microsoft's profit and revenue were higher than Wall Street expectations.

For a few minutes at midnight Moscow time, the value of securities increased to $135.85, as a result, Microsoft's market value was above $1 trillion. By the close of the exchange, the share price stopped at $125.01, and capitalization - at $959.1 billion. At the preliminary auction on April 25, 2019, by 15:00 Moscow time, the quotation rate was $130.75.

Microsoft shares exceeded $135 - the same one predicted by profile analysts polled by Refinitv. Before the release of the reports, experts called Microsoft underestimated. Experts admit that the company's securities may rise in price by another 14.8% in the annual perspective.

As of April 24, 2019, Apple remained the most expensive company in the world with a capitalization of $981 billion, Amazon's figure was $945 billion. Apple and Amazon previously had a cost of more than $1 trillion - in August and September 2018, respectively, while Microsoft did this for the first time. Since the beginning of 2019, Microsoft shares have risen by a quarter.

In the second half of 2018, technology stocks, including Microsoft, fell in price amid trade tensions between the United States and China, as well as an increase in the money market rate by the US Federal Reserve. In January 2019, the Fed did not change the base rate again due to fears for further growth in the American economy. Many analysts and traders even expect the U.S. central bank to go further by cutting rates in 2019. This led to a recovery in stock markets, and demand for technology stocks again became strong.^[6]

Microsoft ahead of Apple to become the most expensive company

On November 23, 2018, Microsoft became the world's most expensive company, ahead of Apple for the first time in a long time. Shares of the latter are getting cheaper due to weak demand for new iPhones.

During trading on the Nasdaq exchange on Friday, November 23, Microsoft's market capitalization reached $753.34 billion, and Apple fell to $746.82 billion. Closes the top three most expensive Amazon companies with an indicator of $736.8 billion. Next is Alphabet Holding with a result of $726 billion.

According to the Khaleej Times, the so-called FAANG group of companies (Facebook, Amazon, Apple, Netflix and Google) is going through difficult times. So, on November 20, 2018, the total capitalization of these companies simultaneously decreased by $1.02 trillion. FAANG participants lost $253 billion, $280 billion, $253 billion, $67 billion and $164 billion in value, respectively.

The collapse in Apple's market value followed on news of poor sales of a line of new smartphones, especially the iPhone XR. In addition, investors were alerted by the fact that in the latest quarterly report, Apple refused to report quantitative sales figures for its gadgets.

The Khaleej Times noted that over the past decade, technology stocks have spurred the growth of the entire stock market. During this time, investors ceased to fear that the value of such companies was inflated, so they continued to look closely and buy such securities.

However, 2018 turned out to be a difficult year for technology companies due to the threat of market regulation, a loss of confidence in social networks after data breach scandals, weak revenue forecasts and an expected increase in interest rates by the    US Federal Reserve.

The software market had the most predictable growth story in the economy. Now we fear a slowdown. People are looking forward to 2019 and say expectations are too high, "said David Older, director of stock market research at Carmignac.[7]

Amazon has become more expensive than Microsoft for the first time in history

In February 2018, Amazon became more expensive than Microsoft for the first time in history. This happened after the companies published financial statements. Read more here.

2017

Revenue Growth with Office 365

In July 2017, Microsoft published an annual report, which suggests that the company's revenues have grown due to its growing cloud business and strong demand for Office 365 services.

For the reporting 12-month period, which ended on June 30, 2017, Microsoft's net profit amounted to $21.2 billion, which is 26% more than a year earlier. Revenue rose 5% to $90 billion.

The main stimulators of Microsoft's financial recovery were cloud and enterprise solutions. In the Productivity and Business Processes division (office applications Office and Office 365, as well as customer relationship management systems Dynamics CRM), annual revenue increased from 26.5 to 30.4 billion. In the dollars structure of Intelligent Cloud (server and cloud solutions), revenues rose from $25 to $27.4 billion. At the same time, operating profit in both groups decreased.

It also follows from the report that annual revenue from sales of cloud services to commercial customers exceeded $18.9 billion. For the first time, revenues from Office 365 were higher than sales of office software licenses, said Microsoft CFO Amy Hood. By the end of June 2017, more than 27 million consumers use Office 365 services. Corporate and private users are abandoning the old Office suite in favor of cloud subscriptions, bringing more stable and repetitive revenues to Microsoft, Bloomberg said.

Azure is still lagging behind Amazon Web Services (AWS), but more customers are starting to work with Microsoft's cloud platform, Microsoft Suisse Group analysts said.

The falling business is the More Personal Computing division (responsible for selling Windows licenses, tablets, phones, game consoles). In fiscal 2017, revenue here amounted to $38.8 billion against $40.4 billion in 2016, and profit - $8.3 billion.^[8]

Increase in value to $500 billion for the first time in 17 years

At the end of January 2017, Microsoft's value exceeded $500 billion for the first time in 17 years. The company's quotes rose after the release of revenues that were above market expectations.

According to data from the Nasdaq exchange, by the time trading ended on January 27, 2017, Microsoft securities had risen in price by 2.4% and reached the highest value in the history of the company - $65.78 apiece. At the same time, the market capitalization did not update the record, but turned out to be the highest since March 2000, when Microsoft was estimated at just over $550 billion. On January 27, 2017, the figure rose to $523.5 billion.

Microsoft is one of the three most expensive companies in the world, second only Apple to and, Alphabet whose market capitalization on January 27 was 642 and 570 billion dollars , respectively.

The rise in the value of Microsoft shares occurred after the publication of the results of the second quarter of fiscal year 2017 (October-December 2016 calendar). During this period, the corporation received a net profit of $5.2 billion, which is 3.6% more than a year earlier. Adjusted revenue (excluding LinkedIn purchase) was $25.8 billion, adjusted earnings were 84 cents per share, while analysts polled by Thomson Reuters I/B/E/S expected performance at $25.3 billion and 79 cents per share, respectively.

In the 12 months before the release of these results, Microsoft shares rose 23.2%. At the same time, the company's revenue and profits were above Wall Street's expectations of seven quarters out of eight.

Reuters notes that since Satya Nadella joined Microsoft in February 2014, the company's shares have risen significantly: then they cost $34, and the software giant's capitalization was measured at $315 billion.

We're starting to see an important shift in the Microsoft business model where profitability in growing segments is improving, analysts at RBC Capital Markets say.[9]

2016

First drop in revenue in 7 years

On July 19, 2016, Microsoft released its results in fiscal year 2016. The American company's revenue fell for the first time since 2009.

According to the results of the 12-month reporting period, closed on June 30, 2016, Microsoft sales amounted to $85.32 billion, which is 8.8% less than a year earlier. At the same time, net profit increased - from $12.19 billion to $16.8 billion. Operating profit reached $20.2 billion. In the 2015 fiscal year, Microsoft made a write-off of $7.5 billion spent on the acquisition of Nokia Devices and Services.

One of the main reasons for Microsoft's revenue decline is weak demand for personal computers. According to IDC analysts, in 2015, the global PC market contracted by a record high of 10.4%.

In fiscal 2016, revenue from More Personal Computing (among other things, responsible for selling Windows licenses) fell to $40.5 billion from $43.2 billion. In the Intelligent Cloud group (server and cloud solutions), revenues rose 5.6% to $25 billion.

Productivity and Business Processes (office applications Office and, Office 365 as well as customer relationship management systems Dynamics CRM) ended the reporting year with revenue of $26.5 billion, which is almost the same as a year ago. Operating profit in this structure decreased by almost 7% to $12.5 billion.

The past year has been pivotal both in our transformation and in partnership with buyers who are conducting their digital transformations. Microsoft Cloud is gaining significant momentum, and we are able to achieve new capabilities next year, "said Microsoft CEO Satya Nadella[10]

It also follows from the Microsoft report that in April-June 2016, Microsoft returned about $6.4 billion to its shareholders as dividends and share buybacks.

Microsoft says sales of its commercial cloud services reach $14 billion in annual estimates. Officially, the turnover from commercial cloud services is estimated by revenue for the last month of the quarter from Office 365, Azure, Dynamics 365 and other cloud assets multiplied by 12.

This CEO is what the company says: Satya Nadella"On an annualized basis, our commercial turnover from the cloud today exceeds $14 billion, and we are on track to achieve the $20 billion goal in fiscal 2018. Users choose Microsoft Cloud for the following reasons: they need a global hyper-scalable cloud provider that can be trusted and meets corporate needs. Along with cloud servers, they need support for hybrid solutions embedded in a hyperscale service. They need advanced services to help build their own digital resources related to enterprise IoT application development, advanced analytics and artificial intelligence functions. Moreover, and most importantly, IT and IB-directors business development managers and developers see our operational consistency, performance, and security benefits extending to all of their digital assets, including cloud security and management capabilities, Windows 10 Office 365, Dynamics 365, Enterprise Mobility, and Azure^[11]

Dynamics of Microsoft's share in the smartphone market

Mobile phone and smartphone sales leaders from 1992 to 2018 in animation below.

2015

Profit drop of 2 times due to Nokia costs

July 21, 2015 Microsoft released a report on the work for the 2014-2015 fiscal year. The US corporation's profits have almost halved due to falling Windows sales and restructuring costs associated with the incorporation of Nokia's phone business.

According to data released by Microsoft, according to the results of the 12-month reporting period closed on June 30, 2015, the company's net profit amounted to $12.2 billion against $22.1 billion a year earlier. Operating profit for the same period fell to $18.2 billion from $27.8 billion. The company's annualized revenue grew by almost 8%, reaching $93.6 billion.

The main reason for the fall in Microsoft profits was $7.5 billion, written off during the restructuring of the company

The fall in Microsoft's profits is largely due to the write-off of $7.5 billion during the restructuring, in which Nokia's mobile division joined the company. Due to these unplanned costs in the fourth fiscal quarter (April-June 2015), Microsoft received a record loss in its history - $3.2 billion. This amount took into account the cost of $940 million for job reduction programs announced in July 2015 and 2014.

"Our strategy of investing in areas where business differentiation and growth potential takes place is paying off. Thus, growth in Surface, Xbox, Bing, Office 365, Azure and Dynamics CRM Online products turned out to be at least double-digit, - comments on the financial statements of Microsoft CEO Satya Nadella. "The upcoming release of Windows 10 will create new opportunities for Microsoft and our ecosystem."

It also follows from the Microsoft report that in the 2014-2015 fiscal year, sales in the Devices and Consumer Licensing division, which, in particular, includes revenue from licensing OEM versions of Windows, decreased to $15 billion against $19.5 billion a year earlier. Revenue in the department of sales of licenses to corporate customers during this period decreased to $41 billion from $42.1 billion. In the telephone business, the turnover almost quadrupled - to $7.5 billion.^[12]

Financial reorganization of the company

On September 28, 2015, Microsoft announced a financial reorganization, in which the American corporation will publish data on the income of the three main divisions instead of the previous seven. The software giant is changing its reporting format to take into account its focus on the cloud and mobile business.

According to Reuters, citing a statement from Microsoft, the company's revenue and operating profit will be distributed across three divisions: Productivity and Business Processes, Intelligent Cloud and More Personal Computing.

Productivity and Business Processes includes Microsoft Office and Office 365 office applications, as well as Dynamics and Dynamics CRM customer relationship management systems.

Intelligent Cloud will take into account the revenues of server products and services, including Windows Server operating systems, Windows Azure cloud platform and SQL Server relational database analysis and management systems.

The More Personal Computing segment will include sales of consumer electronics (tablets, smartphones, game consoles, etc.), as well as revenue from licensing Windows operating systems and a business related to the Bing search engine.

As Microsoft spokesman Cameron Bays clarified to Bloomberg, Microsoft will also have a small group, Corporate and Other, responsible for future revenues.^[13]

Before this reorganization, the cloud business, server solutions, Windows and Office were part of Commercial's enterprise products division, and the consumer area was overseen by the Devices & Consumer structure.

Microsoft will begin reporting on the new system in the first quarter of fiscal 2016, which will be closed at the end of September 2015. The company will release the financial results of this period on October 22. Microsoft also promises to release reports, compiled taking into account the reorganization, for the 2014 and 2015 fiscal years.^[14]

Microsoft writes off $7.6 billion from Nokia deal

On July 8, 2015, Microsoft announced that it had written off $7.6 billion in impairment of assets related to the Nokia deal. In addition, the software giant will spend $750-850 million on restructuring, during which Nokia's mobile division is being integrated with the main structure of Microsoft. It is planned to complete most of the job reduction and business transformation program by the end of calendar year 2015.

Microsoft admits that the company's further prospects in the smartphone market were below initial expectations. At the same time, the telephone business is showing growth: in January-March 2015, the company sold 8.6 million Lumia smartphones, which is 18% more than a year earlier, and revenue amounted to $1.4 billion.

"We are moving from a strategy for self-development of the mobile business to a strategy for creating and growing the Windows ecosystem, which includes our first family of devices," said Satya Nadella.

Microsoft cloud sales are growing, Windows is collapsing

On January 27, 2015, at a conference on the publication of Microsoft's quarterly reporting, CEO Satya Nadella spoke about the company's success in the cloud market.

In 2014, cloud solutions brought Microsoft about $5.5 billion, which roughly corresponds to the income of one of the largest market participants - Salesforce. Nadella linked Microsoft's success in the commercial cloud market to the Office 365, Azure and Dynamic CRM Online projects.

"Azure

services are growing in popularity with corporate customers and developers. At the same time, we are rapidly improving hybrid services, solutions in the field of cloud storage and virtualization, as well as expanding offers for working with data and analyzing them, says the head of Microsoft. - Office 365 now includes new software capabilities for phones and tablets, increasing the productivity of gadgets. We continue to invest in business-critical solutions by adding mobile device management and Enterprise Mobility Suite functionality to Office 365. "

In October-December 2014, the number of Office 365 Home and Personal subscribers increased by 2.1 million compared to the previous quarter. The total user base of the service reached 9.2 million, and revenue in this segment jumped 150% on an annualized basis.

Microsoft's cloud business reaches $5.5 billion

Although cloud computing generates only 5% of Microsoft's revenue, Satya Nadella pays increased attention to this particular business, and this is no coincidence. Prior to taking over the company, Nadella served as executive vice president of Cloud and Enterprise and led the development of the cloud computing strategy.

Microsoft is focusing on clouds amid the fall of its core Windows operating systems business. In October-December 2014, the company's Windows OEM Pro licensing revenues fell 13%. Sales of licenses for regular OS versions decreased by the same amount. As a result, the quarterly profit of the software giant decreased by 10%.

2014: Q4 Fin: Revenue + 8% to $26.6 billion

The company's total sales in the fourth quarter of 2014 amounted to $26.6 billion, which is 8% more than in the same period in 2013.

Revenues from, Azure, and Office 365 Dynamic CRM Online other cloud services of the company Microsoft continue to grow. Over the year, the revenue of the cloud services division increased by 114%, the company said, the potential annual income from them is estimated at $5.5 billion.

The company's total sales in the fourth quarter of 2014 reached $26.6 billion, which is 8% more than in the same period in 2013. However, net income due to expenses related to restructuring and tax adjustments fell by almost 12% to $5.86 billion.

Sales of Surface Pro 3 tablets raised division revenue by 24% and exceeded $1 billion. At the same time, sales of Xbox consoles fell by 20%, to $703 million. Another $2.3 billion brought sales of cell phones.

From $5.5 billion to $4.2 billion, revenue from licensing consumer versions of Windows, Windows Phone and Office 2013 packages decreased.

Satya Nadella, CEO of Microsoft, expects the release of Windows 10, even with the company offering it for free to users of previous versions throughout the year, will create a number of new monetization opportunities in the future.

2012

Q3 Fin: Revenue + 6% to $17.4 billion

In the third quarter of fiscal 2012 (ended March 31), Microsoft earned $17.41 billion, which is 6% more than the same period a year ago. At the same time, profits fell 2.4% to $5.11 billion.

The revenue of the Microsoft Server & Tools division in the third quarter amounted to $4.57 billion - 14.1% more than the same period last fiscal year. The main prerequisites for this were double-digit growth in SQL Server sales volumes and an increase of more than 20% in sales volumes in monetary terms of System Center.

The revenue of the Microsoft Business division amounted to $5.81 billion - 9.1% more than the same period last fiscal year. This is mainly a result of the growing popularity of Office 2010 among end users and in the corporate environment. Dynamics sales revenues grew by 11%, Dynamics CRM - by more than 30%.

The total income of the divisions of Microsoft Windows and Microsoft Windows Live compared to the same period a year ago also increased by 4% and amounted to $4.62 billion. One of the reasons is the confident penetration of Windows 7 on desktops in the corporate segment, where the OS share reached 40%.

Several divisions listed above play a key role in Microsoft's revenue mix. According to Allan Krans, an analyst at Technology Business Research (TBR), the software giant's further financial successes will directly depend on the ability to update product lines in a timely manner and meet consumer wishes.

Steve Ballmer, Microsoft CEO, expressed satisfaction with the financial performance in an official statement. He expressed confidence that in the coming calendar year his company will be able to present a large number of products and services for ordinary consumers and corporate users. First of all, this is the new Windows 8 OS for PCs and tablets and the next version of Office.

First quarterly loss in the company's history

In July 2012, Microsoft released data for the last fiscal quarter: for the first time in the 26 years since the corporation went public, these results were negative.

Microsoft considers the purchase of the aQuantitative service for $6.3 billion in 2007 to be the reason for its failures, which did not contribute to strengthening the corporation's competitive position towards Google: until now, online services account for only 4% of revenue in its business structure. As before, Microsoft makes the main revenue from software sales, primarily Microsoft Windows and Microsoft Office.

The company's net loss in the fiscal fourth quarter was $492 million, or $0.06 per share. In the same period a year earlier, the corporation's profit was $5.9 billion or $0.69 per share. In general, revenue for the fourth quarter increased by 4% and reached $18.06 billion.

The slight depression in the company is primarily due to the fact that now all efforts have been thrown into the release of the new operating system Windows 8, the release of which is scheduled for October 26, 2012. This is the most extreme redesign of the system since it entered the market. Corporation CFO Peter Klein told analysts that "according to the company's expectations, Windows sales revenue will be at the level of the PC market growth rate," which is currently showing negative dynamics, according to forecasts, it will last until September 2012.

Even if the revenues from the sale of Windows along with the release of the new version remain flat, this will still be better than the situation that has developed in the division at the moment: its revenues have been declining over five of the last network of reporting quarters. They decreased by 13% in the fourth quarter of the current financial year to $4.1 billion.

Q1 Fin: Sales slump 8% to $16bn

Quarterly profit Microsoft fell below the expected 22% as sales of computers with the operating system Windows declined sharply ahead of the release of new versions of the system itself and the office applications. Microsoft Office

This circumstance caused dissatisfaction with investors who underestimated the effect of a decrease in PC sales, so that in the first hour of trading after the announcement of financial results, Microsoft shares fell 1.3%.

In the first quarter of the new fiscal year, Microsoft's profit fell to $4.47 billion from $5.74 billion in the same quarter a year earlier.

In general, sales of the corporation decreased by 8% to $16.01 billion. Against the general background, the results of the server division, which is responsible, among other things, for data centers and cloud servers, turned out to be positive: its profit grew by 8% to $4.55 billion. The Windows division showed a profit of $3.24 billion, which is 33% less in annual terms.

Microsoft Business Division generated $5.5 billion, down 2% from the same period a year earlier. Online Services increased revenue by 9% to $697 million, largely due to the success of the search engine. The Entertainment and Devices division, which is responsible for entertainment services and device production, showed $1.95 billion in revenue (minus 1% compared to the previous year).

Q2 FIN: 2.7% revenue growth

reported a Microsoft decline in profit in the second quarter of the next financial year, although the company's revenue increased, largely due to Windows a 24% increase in the division's revenue.

Thus, the reporting quarter ended on December 31, 2012, during this period the company's revenue increased by 2.7% to $21.46 billion. Net income shrank to $6.38 billion or $0.76 per share from $6.62 billion or $0.78 per share a year earlier.

Windows division revenue amounted to $5.88 billion, which is 24% more than in the same period last year. The server products division, which is responsible for selling products such as Windows Server and Microsoft System Center, showed revenue growth of 9% to $5.19 billion. At the same time, System Center sales grew by 18%, and SQL Server - by 16%, respectively.

The business unit, which is responsible for sales of the Microsoft Office package, earned $5.69 billion in the specified fiscal quarter, which is 10% less in annual comparison. Revenue from server software sales, including Lync, Microsoft SharePoint and Microsoft Exchange, showed "double-digit growth."

The division of devices and entertainment services, which is engaged, in particular, in the production of Xbox, gained 11% less in annual comparison, only $3.77 billion. Interestingly, the Skype-related business, which is also part of this division, showed 59% growth, but not in money, but in minutes of talk. The online services division increased revenue by 11% to $869 million.

Speaking to analysts, the CFO of the corporation, Peter Klein, called the results "solid." He also added that the market situation favors Microsoft in connection with the release of Windows 8, as well as the upcoming release of Microsoft Office 2013 and the Surface Pro tablet . At the moment, Microsoft has already sold more than 60 million copies of Windows 8.

2011: Q2 Fin: Revenue + 5% to $20.8 billion

Microsoft announced the results of the second fiscal quarter, which ended December 31, 2011: the company's revenue amounted to $20.89 billion, which is 5% higher, given the $224 million in future revenues associated with the implementation of the Office 2010 technology warranty program. Net income reached $6.62 billion, or $0.78 per share, compared to $6.63 billion, or $0.77 per share.

The company's chief executive, Steve Ballmer, considered the result "solid," and in a statement predicted that business development would accelerate in the new fiscal year starting in July. The reason for this optimistic view is the launch of upcoming products and services.

Microsoft did not reach the revenue figure of $20.93 billion predicted by the agreed opinion of analysts surveyed by Thomson Reuters, but exceeded the forecast of expected earnings per share of $0.76.

The Business Division generated $6.28 billion in revenue, up 3% year-on-year. 7% - excluding future revenues from Office 2010. Almost 200 million licenses have been sold since its launch, 18 months ago, the company said. Revenues from Exchange and SharePoint rose 10%, while revenues from Lync and Dynamics CRM rose more than 30%.

The Server & Tools division was able to gain $4.77 billion, which is 11% higher. This was helped by "double-digit revenue growth" from sales of premium releases of Windows Server and SQL Server, as well as more than 20% revenue growth from the implementation of System Center.

The Windows and Windows Live division showed a 6% reduction in revenue to $4.74 billion. Since the launch of Windows 7, more than 525 million licenses have been sold.

Revenues from the Online Services group grew by 10% to $784 million, and the Entertainment & Devices division provided revenue of $4.24 billion, which is 15% higher than the previous period. Currently, there are about 66 million Xbox 360 consoles on the market, as well as 18 million Kinect devices. The number of members of the Xbox Live community increased by 33% to reach 40 million.

Reviewing its operating expenses, Microsoft assumes their decline in the range from $28.5 billion to $28.9 billion in general for the year ending June 30. Although analysts expect another weak quarter for sales of personal computers, in their opinion, sales should strengthen in the future during the year.

It remains unclear whether Microsoft will be able to achieve results from a number of new products: Windows Phone, Windows 8 and Office 365. According to Edward Jones analyst Josh Olson, this is the year of the product's life cycle for Microsoft. "How successfully the company will offer its products will say a lot about the year as a whole," he said.

2010: Revenue growth to $62 billion

According to the results of the 2009-2010 financial year, the corporation's revenue grew by 7% to $62.48 billion, profit - by 29% to $18.76 billion:

• Revenue of the Windows & Windows Live division amounted to $18.49 billion against $14.97 billion a year earlier,
• Server & Tools - $14.87 billion against $14.19 billion,
• Online Services - $2.20 billion versus $2.12 billion,
• Business Division - $18.64 billion against $18.91 billion,
• Entertainment & Devices - $8.06 billion compared to $8.04 billion in the 2008-2009 fiscal year.

Microsoft's financials vs. competitors

2009:3% decline in revenue to $58 billion

The company's revenue for the 2008-2009 fiscal year amounted to $58.44 billion, which is 3% less than last year's figure ($60.42 billion). Net profit fell 18% to $14.57 billion against $17.68 billion a year ago. Net income per share was $1.62, down 13% from last year. Since 1986, when the company's shares were listed on the stock exchange, this is the first time that annual revenue has been reduced. Microsoft Chief Financial Officer Chris Liddell explains the results by the poor demand for personal computers. In addition, netbooks that are sold with Windows XP preinstalled, far from the most profitable product for Microsoft, are the most popular among buyers.

At the end of the financial year, revenue increased only from the server division - by 7.3% to $14.13 billion. Revenue of the client division decreased by 13% to $14.71 billion, business units - by 0.2% to $18.89 billion, gaming - by 5.6% to $7.75 billion, online - by 3.7% to $3.09 billion.

After the release of the report, Microsoft shares during the extended trading series fell in price by 7.8% or $2 to $23.56. Prior to publication, the stock rose 3.1% to $25.56. In the remaining period of the current calendar year, the company does not expect improvements, since its revenue directly depends on computer sales, and they, according to analysts, will have to decrease for the first time in 8 years. Gartner predicts a 5% year-on-year decline in global sales.

2007: Sales of $51 billion

The corporation's sales Microsoft for the 2006-2007 fiscal year grew by 15% to $51.10 billion. Net profit amounted to $14.10 billion, income from core activities reached $18.50 billion.

$7.1 billion was invested in Research and Development.

See also

• Microsoft
• History of Microsoft