Microsoft beats expectations as profit jumps 47% on cloud business

Company reports record $16.5bn quarterly net profit

Microsoft beat Wall Street expectations with its fiscal fourth-quarter net profit jumping an annual 47 per cent on strong growth of its cloud business.

Net profit soared to $16.5 billion in the three months to June 30, while full-year net profit for fiscal 2021 increased 38 per cent annually to $61.3bn.

Quote
Our results show that when we execute well and meet customers’ needs in differentiated ways in large and growing market, we generate growth
Satya Nadella, chairman and chief executive of Microsoft

Revenue during the fourth quarter leapt 21 per cent to almost $46.2bn, exceeding analysts' expectations of $44.2bn. It increased 18 per cent annually to $168.1bn for the full fiscal year.

“We are innovating across the technology stack to help organisations drive new levels of tech intensity across their business,” said Satya Nadella, chairman and chief executive of Microsoft.

“Our results show that when we execute well and meet customers’ needs in differentiated ways in large and growing markets, we generate growth … as we have seen in our commercial cloud … and in new franchises we have built, including gaming, security and LinkedIn, all of which surpassed $10bn in annual revenue over the past three years,” added Mr Nadella.

The April-June period marked the Redmond, Washington-based company’s 16th straight quarter of double-digit revenue growth.

The company's stock was down about 1 per cent at $286.5 a share after the earnings announcement. The share price has increased more than 42 per cent in the past year.

Its operating income grew 42 per cent to $19.1bn in the fourth quarter from the prior year period while the diluted earnings per share was up 49 per cent on an annual basis at $2.17.

The company’s productivity and business processes division, which includes both its Microsoft Office business and revenue from LinkedIn, increased 25 per cent to $14.7bn.

LinkedIn revenue grew nearly 46 per cent annually. Microsoft did not give a dollar figure for LinkedIn revenue and did not disclose the number of users.

Microsoft 365 Consumer subscribers increased to 51.9 million at the end of the quarter, the company said.

Revenue in the company’s intelligent cloud business increased 30 per cent year-on-year to $17.4bn in the fourth quarter and its server products and cloud services revenue increased 34 per cent.

“As we closed out the fiscal year, our sales teams and partners delivered a strong quarter with over 20 per cent top and bottom-line growth, highlighted by commercial bookings growth of 30 per cent year-on-year,” said Amy Hood, executive vice president and chief financial officer of the company.

Commercial cloud revenue grew 36 per cent year-on-year to $19.5bn.

The company returned $10.4bn to shareholders in the form of share repurchases and dividends in the fourth quarter, a yearly increase of 16 per cent compared to the prior year period.

Search advertising revenue increased by 46 per cent annually or $737 million, while gaming revenue increased by 11 per cent or $357m, driven by growth in Xbox hardware, in the fourth quarter.

“Xbox hardware revenue increased 172 per cent, driven by higher price and volume of consoles,” the company said.

Surface revenue decreased $348m or 20 per cent yearly, driven by supply chain constraints, it added.

Research and development expenses increased almost 10 per cent yearly to $5.7bn, boosted by the company's investments in cloud engineering and gaming.

Updated: July 29th 2021, 5:43 PM
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