Microsoft beats 4Q expectations as annual revenue tops $100 billion

Ivan Schwartz
July 21, 2018

Microsoft's revenue exceeded $100bn for the first time in fiscal year 2018, the company reported Thursday, as the legacy software company's efforts to reinvent itself as a major player in cloud computing continued to pay off.

Microsoft's overall revenue for the fourth fiscal quarter reached $30.1 billion, up 17 percent YoY and beating analysts' predictions of $29.2 billion.

Leading the charge is the company's revenue was the company's cloud services which were up 53 percent to $6.9 billion.

As usual, it was Microsoft's commercial cloud segment that covers Azure, Office 365, and Dynamics 365 that was responsible for a huge chunk of the revenue.

This brings the full-year revenue to $110.4 billion (up 14 percent on the 2017 financial year), with operating income of $35.1 billion (up 21 percent) and net income of $16.6 billion, a drop of 35 percent, attributed to the impact of the Tax Cut and Jobs Act's $13.8 billion repatriation tax.

The growth and share gains in Microsoft's Azure support field checks indicating an emerging duopoly with Amazon Web Services.

"We're investing aggressively to build Azure as the world's computer", Nadella said, referring to Microsoft's cloud computing platform that competes with services run by Amazon and Google.

Microsoft hits $100bn in revenue for the first time thanks to cloud, Surface growth

Microsoft "has executed on its plan to become a meaningful cloud vendor, though it's still early in the development of that market - and model", writes DiFucci in a note.

The COO also added about the trail of recent acquisitions for the company and how they are looking to bridge the gap between mobile, PC, and console gaming.

Sees "multiple positives" from the quarter that can support sustained double digit growth in revenues, earning per share and free cash flow long term. Meanwhile, Microsoft's Intelligent Cloud business, which includes its server products and cloud services, rose by 23 percent.

Speaking to financial analysts on a conference call, Nadella made a point of praising Azure, noting Microsoft's recently signed mega-deal with Walmart to provide all of the cloud backend for the United States big-box behemoth. Office 365 commercial revenue grew 38 percent.

Surface revenue jumped 25 per cent to $1.1 billion, "driven by strong performance of the latest editions of Surface" says Microsoft, while gaming revenues increased by 39 per cent.

"The combination of Xbox Live Game Pass subscription and Mixer are driving record levels of growth and engagement".

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