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Earnings Release FY21 Q3

NarrativePower BI

Performance

Revenue increased $6.7 billion or 19%, driven by growth across each of our segments. Intelligent Cloud revenue increased, driven by Azure. More Personal Computing revenue increased, driven by Gaming. Productivity and Business Processes revenue increased, driven by Office 365 Commercial and LinkedIn.

Cost of revenue increased $2.1 billion or 19%, driven by growth in commercial cloud and Gaming, offset in part by a reduction in depreciation expense due to the change in estimated useful lives of our server and network equipment.

Gross margin increased $4.6 billion or 19%, driven by growth across each of our segments and the change in estimated useful lives of our server and network equipment. Gross margin percentage was relatively unchanged with the change in estimated useful lives of our server and network equipment. Excluding this impact, gross margin percentage decreased, driven by gross margin percentage reductions in More Personal Computing and Productivity and Business Processes. Commercial cloud gross margin percentage increased 3 points to 70% with the change in estimated useful lives of our server and network equipment. Excluding this impact, commercial cloud gross margin percentage increased slightly, driven by gross margin percentage improvement in Azure, offset in part by sales mix shift to Azure.

Operating expenses increased $542 million or 5%, driven by investments in cloud engineering and commercial sales, offset in part by savings related to COVID-19 across each of our segments.

Key changes in operating expenses were:

Research and development expenses increased $317 million or 6%, driven by investments in cloud engineering.

Sales and marketing expenses increased $171 million or 3%, driven by investments in commercial sales. Sales and marketing included an unfavorable foreign currency impact of 2%.

General and administrative expenses increased $54 million or 4%.

Current year net income and diluted EPS were positively impacted by the tax benefit related to the India Supreme Court decision on withholding taxes, which resulted in an increase to net income and diluted EPS of $620 million and $0.08, respectively.

IMPORTANT NOTICE TO USERS (summary only, click here  for full text of notice); All information is unaudited unless otherwise noted or accompanied by an audit opinion and is subject to the more comprehensive information contained in our SEC reports and filings. We do not endorse third-party information. All information speaks as of the last fiscal quarter or year for which we have filed a Form 10-K or 10-Q, or for historical information the date or period expressly indicated in or with such information. We undertake no duty to update the information. Forward-looking statements are subject to risks and uncertainties described in our  Forms 10-Q and 10-K.

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Information contained in these documents is current as of the earnings date, and not restated for new accounting standards