Microsoft Corp (MSFT)
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Supplied by Morningstar Inc
2015 Annual Report
Earnings Release FY14 Q1
Results driven by strong demand for enterprise products, including cloud services
Progress in devices and consumer businesses
Surface revenue $400 million
Windows OEM Pro revenue grew 6%
Over 2 million Office 365 Home Premium subscribers
Windows Phone growing share and expanding device portfolio
Xbox One will launch on November 22nd
Ongoing strength in enterprise
Commercial revenue grew 10%, with strong annuity growth and healthy renewals
Commercial Office revenue grew 11% and Server product revenue grew 12%
Continued momentum in data platform and unified communications
Commercial cloud revenue grew 103% and also expanded gross margin

Revenue increased, mainly due to higher Commercial Licensing, D&C Hardware, and Commercial Other revenue. Revenue was also impacted by the timing of revenue deferrals.

Operating income increased, reflecting higher revenue and lower general and administrative expenses, offset in part by higher cost of revenue, sales and marketing expenses, and research and development expenses. Key changes in cost of revenue and operating expenses were:

• Cost of revenue increased $946 million or 23%, primarily due to Surface product costs, as well as higher datacenter and headcount-related expenses.

• Sales and marketing expenses increased $359 million or 12%, due mainly to increased advertising of Windows Phone 8 and Surface and higher headcount-related expenses, as well as due to higher fees paid to third-party enterprise software advisors.

• Research and development expenses increased $307 million or 12%, due mainly to higher capitalization of certain costs in the prior year.

• General and administrative expenses decreased $117 million or 10%, primarily due to lower legal charges.

Revenue Vs. Operating Income
RESULTS (in millions, except percentages)
Q114 Q113 Change
Revenue $ 18,529 $ 16,008 16%
$ 6,334 $ 5,308 19%
Related Information
FY14 Earnings Release Schedule
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