Microsoft just reported a solid beat on profits.
- Q3 EPS of $US0.62 (analysts expected $US0.51 earnings per share)
- And Q3 revenue of $US21.73 billion (analysts expected $US21.06 billion in revenue) according to Yahoo Finance.
Many analysts were warning investors that this would not be a killer great quarter for Microsoft, mostly thanks to a softer PC market.
Here are the highlights from the press release.
REDMOND, Wash. — April 23, 2015 — Microsoft Corp. today announced that revenues for the quarter ended March 31, 2015 grew to $US21.7 billion. Gross margin, operating income, and diluted earnings per share (“EPS”) for the quarter were $US14.6 billion, $US6.6 billion, and $US0.61 per share, respectively.
These financial results include $US190 million of integration and restructuring expenses, or a $US0.01 per share negative impact, related to Microsoft’s restructuring plan announced in July 2014 and the ongoing integration of the Nokia Devices and Services (“NDS”) business.
During the quarter, Microsoft returned $US7.5 billion to shareholders in the form of share repurchases and dividends.
The strengthening of the U.S. dollar compared to foreign currencies had a significant impact on results in the quarter. Excluding the effect of foreign exchange rate changes on the GAAP amounts, on a constant currency basis, revenue and gross margin would have grown 9% and 4%, respectively, and operating income and EPS would have declined 4% and 7%, respectively.
Devices and Consumer revenue grew 8% (up 11% in constant currency) to $US9.0 billion, with the following business highlights:
- Office 365 Consumer subscribers increased to over 12.4 million, up 35% sequentially
- Windows OEM Pro revenue declined 19%, as Pro mix returned to pre-Windows XP end-of-support levels and the business PC market declined
- Windows OEM non-Pro revenue declined 26%, primarily due to channel inventory drawdown and ongoing mix shift to opening price point devices
- Search advertising revenue grew 21% (up 24% in constant currency), with Bing U.S. market share at 20.1%, up 150 basis points over prior year
- Xbox Live usage grew over 30%, driven by increased users and deeper user engagement
- Surface revenue of $US713 million, up 44% (up 53% in constant currency) driven by Surface Pro 3
- Phone Hardware revenue of $US1.4 billion, with 8.6 million Lumia units sold
Commercial revenue grew 5% (up 7% in constant currency) to $US12.8 billion, with the following business highlights:
- Commercial cloud revenue grew 106% (up 111% in constant currency) driven by Office 365, Azure and Dynamics CRM Online, and is now on an annualized revenue run rate of $US6.3 billion
- Server products and services revenue grew 12% (up 16% in constant currency), with premium versions of Windows Server, System Center Server and SQL Server together growing 25%
- Office Commercial products and services revenue declined 2% (up 1% in constant currency); transactional revenue was impacted by the continued transition to Office 365 and declines in business PC sales following the XP refresh cycle
- Windows volume licensing revenue declined 2% (up 1% in constant currency), with transactional revenue declining following the XP refresh cycle partially offset by annuity revenue growth