Microsoft's latest quarterly financial results show strong performance, particularly from cloud services

A strong quarterly showing from Microsoft as rumors swirl about a potential purchase of EA. (Source: Arquitectonica)

Microsoft's results for Q2 2017/2018 show favourable increases in revenue and income. Cloud services are the standout performers with Office 365 and Azure as two of the main contributors.

by Craig Ward, 2018/02/06

Microsoft has released their second quarter of fiscal-year 2018 financial results — this is for the quarter ended 31st December, based on Microsoft’s split 2017/2018 financial year — and the results are positive overall. Both revenue and income have increased by double-digit percentages, with the strongest individual performing portfolios being commercial sales of Office 365, Dynamics 365, and Microsoft Azure cloud services.

Overall revenue for the quarter was US$28.9 billion, representing an increase of 12% against the same quarter in the previous financial year while operating income increased by 10% to US$8.7 billion. The revenue breakdown of the three main product branches was:

More Personal Computing - US$12.2 billion (+2%).
- Windows OEM sales (+4%)
- Windows commercial products (-4% due to a large sale during this period last year)
- Gaming products (+8%, helped by Xbox One X)
- Search advertising (+15%, increased price per click and increased volume)
- Surface products (+1%)
Productivity and Business Processes - US$9.0 billion (+25%).
- Commercial office products and cloud services (+10%, although Office 365 commercial was +41%)
- Consumer office products and cloud services (+12%, helped by consumer Office 365 subscriptions hitting 29.2 million.)
- Dynamics products and cloud services (+10%, although Dynamics 365 was +67%)
- LinkedIn
Intelligent Cloud - US$7.8 billion (+15%).
- Server products and cloud services (+18%, although Azure was +98%)
- Enterprise services (+5%)

Overall a strong showing by Microsoft which reflects the emphasis they have put on growing cloud services over the last few years, particularly in the commercial/business space. This can be seen by separating the revenue figures for commercial cloud services from the rest of the report. Doing this shows a revenue of US$5.3 billion which represents a 56% growth in commercial cloud services. These platforms are becoming more important as more businesses and consumers elect to pay for a small selection of subscription services, rather than buying the software outright.

However, despite the increased revenue and income, Microsoft reported a loss of US$6.3 billion for the quarter due to a one-off charge of US$13.8 billion related to the Tax Cuts and Jobs Act 2017.