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Investor Relations

Press Release & Webcast

Earnings Release FY23 Q3

Microsoft Cloud Strength Drives Third Quarter Results

REDMOND, Wash. — April 25, 2023 — Microsoft Corp. today announced the following results for the quarter ended March 31, 2023, as compared to the corresponding period of last fiscal year:

·         Revenue was $52.9 billion and increased 7% (up 10% in constant currency)

·         Operating income was $22.4 billion and increased 10% (up 15% in constant currency)

·         Net income was $18.3 billion and increased 9% (up 14% in constant currency)

·         Diluted earnings per share was $2.45 and increased 10% (up 14% in constant currency)

“The world's most advanced AI models are coming together with the world's most universal user interface - natural language - to create a new era of computing,” said Satya Nadella, chairman and chief executive officer of Microsoft. “Across the Microsoft Cloud, we are the platform of choice to help customers get the most value out of their digital spend and innovate for this next generation of AI.”


“Focused execution by our sales teams and partners in this dynamic environment resulted in Microsoft Cloud revenue of $28.5 billion, up 22% (up 25% in constant currency) year-over-year,” said Amy Hood, executive vice president and chief financial officer of Microsoft.

Business Highlights

Revenue in Productivity and Business Processes was $17.5 billion and increased 11% (up 15% in constant currency), with the following business highlights:

·         Office Commercial products and cloud services revenue increased 13% (up 17% in constant currency) driven by Office 365 Commercial revenue growth of 14% (up 18% in constant currency)

·         Office Consumer products and cloud services revenue increased 1% (up 4% in constant currency) and Microsoft 365 Consumer subscribers grew to 65.4 million

·         LinkedIn revenue increased 8% (up 10% in constant currency)

·         Dynamics products and cloud services revenue increased 17% (up 21% in constant currency) driven by Dynamics 365 revenue growth of 25% (up 29% in constant currency)

Revenue in Intelligent Cloud was $22.1 billion and increased 16% (up 19% in constant currency), with the following business highlights:

·         Server products and cloud services revenue increased 17% (up 21% in constant currency) driven by Azure and other cloud services revenue growth of 27% (up 31% in constant currency)

Revenue in More Personal Computing was $13.3 billion and decreased 9% (down 7% in constant currency), with the following business highlights:

·         Windows OEM revenue decreased 28%

·         Devices revenue decreased 30% (down 26% in constant currency)

·         Windows Commercial products and cloud services revenue increased 14% (up 18% in constant currency)

·         Xbox content and services revenue increased 3% (up 5% in constant currency)

·         Search and news advertising revenue excluding traffic acquisition costs increased 10% (up 13% in constant currency)

Microsoft returned $9.7 billion to shareholders in the form of share repurchases and dividends in the third quarter of fiscal year 2023.

Business Outlook

Microsoft will provide forward-looking guidance in connection with this quarterly earnings announcement on its earnings conference call and webcast.

Quarterly Highlights, Product Releases, and Enhancements 

Every quarter Microsoft delivers hundreds of products, either as new releases, services, or enhancements to current products and services. These releases are a result of significant research and development investments, made over multiple years, designed to help customers be more productive and secure and to deliver differentiated value across the cloud and the edge.

Here are the major product releases and other highlights for the quarter, organized by product categories, to help illustrate how we are accelerating innovation across our businesses while expanding our market opportunities.

Environmental, Social, and Governance (ESG)

To better execute on Microsoft’s mission, we focus our Environmental, Social, and Governance (ESG) efforts where we can have the most positive impact. To learn more about our latest initiatives and priorities, please visit our investor relations ESG website. 

Webcast Details

Satya Nadella, chairman and chief executive officer, Amy Hood, executive vice president and chief financial officer, Alice Jolla, chief accounting officer, Keith Dolliver, deputy general counsel, and Brett Iversen, vice president of investor relations, will host a conference call and webcast at 2:30 p.m. Pacific time (5:30 p.m. Eastern time) today to discuss details of the company’s performance for the quarter and certain forward-looking information. The session may be accessed at http://www.microsoft.com/en-us/investor. The webcast will be available for replay through the close of business on April 25, 2024.

Constant Currency

Microsoft presents constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars using the average exchange rates from the comparative period rather than the actual exchange rates in effect during the respective periods. All growth comparisons relate to the corresponding period in the last fiscal year. Microsoft has provided this non-GAAP financial information to aid investors in better understanding our performance. The non-GAAP financial measures presented in this release should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP.

Financial Performance Constant Currency Reconciliation

 

Three Months Ended March 31,

 ($ in millions, except per share amounts)

Revenue

Operating Income

Net Income

Diluted Earnings per Share

2022 As Reported (GAAP)

$49,360

$20,364

$16,728

$2.22

2023 As Reported (GAAP)

$52,857

$22,352

$18,299

$2.45

Percentage Change Y/Y (GAAP)

7%

10%

9%

10%

Constant Currency Impact

$(1,482)

$(1,069)

$(704)

$(0.09)

Percentage Change Y/Y Constant Currency

10%

15%

14%

14%

Segment Revenue Constant Currency Reconciliation

 

Three Months Ended March 31,

 ($ in millions)

Productivity and Business Processes

Intelligent Cloud

More Personal Computing

2022 As Reported (GAAP)

$15,789

$18,987

$14,584

2023 As Reported (GAAP)

$17,516

$22,081

$13,260

Percentage Change Y/Y (GAAP)

11%

16%

(9)%

Constant Currency Impact

$(587)

$(591)

$(304)

Percentage Change Y/Y Constant Currency

15%

19%

(7)%

We have recast certain prior period amounts to conform to the way we internally manage and monitor our business.

 

Selected Product and Service Revenue Constant Currency Reconciliation       

 

Three Months Ended March 31, 2023

Percentage Change Y/Y (GAAP)

Constant Currency Impact

Percentage Change Y/Y Constant Currency

Microsoft Cloud revenue

22%

3%

25%

Office Commercial products and cloud services

13%

4%

17%

Office 365 Commercial

14%

4%

18%

Office Consumer products and cloud services

1%

3%

4%

LinkedIn

8%

2%

10%

Dynamics products and cloud services

17%

4%

21%

Dynamics 365

25%

4%

29%

Server products and cloud services

17%

4%

21%

Azure and other cloud services

27%

4%

31%

Windows OEM

(28)%

0%

(28)%

Windows Commercial products and cloud services

14%

4%

18%

Xbox content and services

3%

2%

5%

Search and news advertising excluding traffic acquisition costs

10%

3%

13%

Devices

(30)%

4%

(26)%

About Microsoft

Microsoft (Nasdaq “MSFT” @microsoft) enables digital transformation for the era of an intelligent cloud and an intelligent edge. Its mission is to empower every person and every organization on the planet to achieve more.

Forward-Looking Statements

Statements in this release that are “forward-looking statements” are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors such as:

·         intense competition in all of our markets that may lead to lower revenue or operating margins;

·         increasing focus on cloud-based services presenting execution and competitive risks;

·         significant investments in products and services that may not achieve expected returns;

·         acquisitions, joint ventures, and strategic alliances that may have an adverse effect on our business;

·         impairment of goodwill or amortizable intangible assets causing a significant charge to earnings;

·         cyberattacks and security vulnerabilities that could lead to reduced revenue, increased costs, liability claims, or harm to our reputation or competitive position;

·         disclosure and misuse of personal data that could cause liability and harm to our reputation;

·         the possibility that we may not be able to protect information stored in our products and services from use by others;

·         abuse of our advertising, professional, marketplace, or gaming platforms that may harm our reputation or user engagement;

·         the development of the internet of things presenting security, privacy, and execution risks;

·         issues about the use of artificial intelligence in our offerings that may result in competitive harm, legal liability, or reputational harm;

·         excessive outages, data losses, and disruptions of our online services if we fail to maintain an adequate operations infrastructure;

·         quality or supply problems;

·         government litigation and regulatory activity relating to competition rules that may limit how we design and market our products;

·         potential consequences under trade, anti-corruption, and other laws resulting from our global operations;

·         laws and regulations relating to the handling of personal data that may impede the adoption of our services or result in increased costs, legal claims, fines, or reputational damage;

·         claims against us that may result in adverse outcomes in legal disputes;

·         uncertainties relating to our business with government customers;

·         additional tax liabilities;

·         the possibility that we may fail to protect our source code;

·         legal changes, our evolving business model, piracy, and other factors may decrease the value of our intellectual property;

·         claims that Microsoft has infringed the intellectual property rights of others;

·         damage to our reputation or our brands that may harm our business and operating results;

·         adverse economic or market conditions that may harm our business;

·         catastrophic events or geo-political conditions, such as the COVID-19 pandemic, that may disrupt our business;

·         exposure to increased economic and operational uncertainties from operating a global business, including the effects of foreign currency exchange and

·         the dependence of our business on our ability to attract and retain talented employees.

For more information about risks and uncertainties associated with Microsoft’s business, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of Microsoft’s SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting Microsoft’s Investor Relations department at (800) 285-7772 or at Microsoft’s Investor Relations website at http://www.microsoft.com/en-us/investor.

All information in this release is as of March 31, 2023. The company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company’s expectations.

For more information, press only:

Microsoft Media Relations, WE Communications for Microsoft, (425) 638-7777, rrt@we-worldwide.com

For more information, financial analysts and investors only:

Brett Iversen, Vice President, Investor Relations, (425) 706-4400

Note to editors: For more information, news and perspectives from Microsoft, please visit the Microsoft News Center at http://www.microsoft.com/news. Web links, telephone numbers, and titles were correct at time of publication, but may since have changed. Shareholder and financial information, as well as today’s 2:30 p.m. Pacific time conference call with investors and analysts, is available at http://www.microsoft.com/en-us/investor.


 

MICROSOFT CORPORATION


INCOME STATEMENTS

(In millions, except per share amounts) (Unaudited)


Three Months Ended

March 31,

Nine Months Ended

March 31,

 

2023

 

2022

 

2023

 

2022

Revenue:

Product

 $15,588

 $17,366

 $47,846

 $54,776

Service and other

37,269

 

31,994

 

107,880

 

91,629

Total revenue

52,857

 

49,360

 

155,726

 

146,405

Cost of revenue:

Product

3,941

4,584

13,933

14,707

Service and other

12,187

 

11,031

 

35,135

 

31,514

Total cost of revenue

16,128

 

15,615

 

49,068

 

46,221

Gross margin

36,729

33,745

106,658

100,184

Research and development

6,984

6,306

20,456

17,663

Sales and marketing

5,750

5,595

16,555

15,521

General and administrative

1,643

1,480

5,378

4,151

Operating income

22,352

 

20,364

 

64,269

 

62,849

Other income (expense), net

321

 

(174)

 

315

 

380

Income before income taxes

22,673

20,190

64,584

63,229

Provision for income taxes

4,374

 

3,462

 

12,304

 

7,231

Net income

 $18,299

 

 $16,728

 

 $52,280

 

 $55,998

Earnings per share:

Basic

 $2.46

 $2.23

 $7.02

 $7.46

Diluted

 $2.45

 $2.22

 $6.99

 $7.41

Weighted average shares outstanding:

Basic

7,441

7,493

7,450

7,504

Diluted

7,464

 

7,534

 

7,474

 

7,552

 


 

COMPREHENSIVE INCOME STATEMENTS

(In millions) (Unaudited)


Three Months Ended

March 31,

Nine Months Ended

March 31,

 

2023

 

2022

 

2023

 

2022

Net income

 $18,299

 

 $16,728

 

 $52,280

 

 $55,998

Other comprehensive income (loss), net of tax:

Net change related to derivatives

(9)

6

(34)

8

Net change related to investments

753

(2,882)

(796)

(4,047)

Translation adjustments and other

69

 

(37)

 

(136)

 

(259)

Other comprehensive income (loss)

813

 

(2,913)

 

(966)

 

(4,298)

Comprehensive income

 $19,112

 

 $13,815

 

 $51,314

 

 $51,700

 


 

BALANCE SHEETS

(In millions) (Unaudited)


 

March 31,

2023

 

June 30,

 2022

Assets

Current assets:

Cash and cash equivalents

 $26,562

 $13,931

Short-term investments

77,865

 

90,826

Total cash, cash equivalents, and short-term investments

104,427

104,757

Accounts receivable, net of allowance for doubtful accounts of $495 and $633

37,420

44,261

Inventories

2,877

3,742

Other current assets

19,165

 

16,924

Total current assets

163,889

169,684

Property and equipment, net of accumulated depreciation of $65,998 and $59,660

88,132

74,398

Operating lease right-of-use assets

13,879

13,148

Equity investments

9,415

6,891

Goodwill

67,940

67,524

Intangible assets, net

9,879

11,298

Other long-term assets

26,954

 

21,897

Total assets

 $380,088

 

 $364,840

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

 $15,305

 $19,000

Current portion of long-term debt

6,245

2,749

Accrued compensation

10,411

10,661

Short-term income taxes

4,163

4,067

Short-term unearned revenue

36,903

45,538

Other current liabilities

12,664

 

13,067

Total current liabilities

85,691

95,082

Long-term debt

41,965

47,032

Long-term income taxes

25,000

26,069

Long-term unearned revenue

2,698

2,870

Deferred income taxes

302

230

Operating lease liabilities

12,312

11,489

Other long-term liabilities

17,437

 

15,526

Total liabilities

185,405

 

198,298

Commitments and contingencies

Stockholders' equity:

Common stock and paid-in capital - shares authorized 24,000; outstanding 7,437 and 7,464

92,093

86,939

Retained earnings

108,234

84,281

Accumulated other comprehensive loss

(5,644)

(4,678)

Total stockholders' equity

194,683

 

166,542

Total liabilities and stockholders' equity

 $380,088

 

 $364,840


 

CASH FLOWS STATEMENTS

(In millions) (Unaudited)


Three Months Ended

March 31,

Nine Months Ended

March 31,

 

2023

 

2022

 

2023

 

2022

Operations

Net income

 $18,299

 $16,728

 $52,280

 $55,998

Adjustments to reconcile net income to net cash from operations:

Depreciation, amortization, and other

3,549

3,773

9,987

10,481

Stock-based compensation expense

2,465

1,906

7,195

5,505

Net recognized losses (gains) on investments and derivatives

(40)

105

152

(566)

Deferred income taxes

(1,675)

(198)

(4,171)

(5,985)

Changes in operating assets and liabilities:

Accounts receivable

(1,408)

857

7,157

5,800

Inventories

106

(279)

868

(662)

Other current assets

1,152

91

428

1,861

Other long-term assets

(554)

(724)

(1,285)

(2,230)

Accounts payable

(407)

520

(4,032)

284

Unearned revenue

(181)

(209)

(8,689)

(7,437)

Income taxes

1,414

1,091

(1,039)

1,687

Other current liabilities

1,715

1,287

(490)

(1,111)

Other long-term liabilities

6

 

438

 

451

 

781

Net cash from operations

24,441

 

25,386

 

58,812

 

64,406

Financing

Repayments of debt

0

(4,197)

(1,750)

(9,023)

Common stock issued

536

477

1,354

1,380

Common stock repurchased

(5,509)

(8,822)

(16,541)

(23,939)

Common stock cash dividends paid

(5,059)

(4,645)

(14,746)

(13,503)

Other, net

(258)

 

(158)

 

(839)

 

(522)

Net cash used in financing

(10,290)

 

(17,345)

 

(32,522)

 

(45,607)

Investing

Additions to property and equipment

(6,607)

(5,340)

(19,164)

(17,015)

Acquisition of companies, net of cash acquired, and purchases of intangible and other assets

(301)

(18,719)

(1,329)

(20,775)

Purchases of investments

(9,063)

(8,723)

(25,675)

(21,537)

Maturities of investments

13,154

1,099

26,744

15,214

Sales of investments

1,239

16,693

8,725

25,218

Other, net

(1,686)

(1,181)

(2,847)

(1,687)

Net cash used in investing

(3,264)

 

(16,171)

 

(13,546)

 

(20,582)

Effect of foreign exchange rates on cash and cash equivalents

29

 

24

 

(113)

 

57

Net change in cash and cash equivalents

10,916

(8,106)

12,631

(1,726)

Cash and cash equivalents, beginning of period

15,646

 

20,604

 

13,931

 

14,224

Cash and cash equivalents, end of period

 $26,562

 

 $12,498

 

 $26,562

 

 $12,498

 

SEGMENT REVENUE AND OPERATING INCOME

(In millions) (Unaudited)

 

Three Months Ended

March 31,

 

Nine Months Ended

March 31,

 

 

 

2023

 

2022

 

2023

 

2022

Revenue

 

 

 

 

 

 

 

Productivity and Business Processes

$17,516

 

$15,789

 

 $50,983

 

 $46,764

Intelligent Cloud

22,081

 

18,987

 

63,914

 

54,161

More Personal Computing

13,260

 

14,584

 

40,829

 

45,480

Total

$52,857

 

$49,360

 

$155,726

 

$146,405

Operating Income

 

 

 

 

 

 

 

Productivity and Business Processes

$8,639

 

$7,185

 

$25,137

 

$22,454

Intelligent Cloud

9,476

 

8,391

 

27,358

 

24,395

More Personal Computing

4,237

 

4,788

 

11,774

 

16,000

Total

$22,352

 

$20,364

 

$64,269

 

$62,849

 

We have recast certain prior period amounts to conform to the way we internally manage and monitor our business.

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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