Microsoft reports Q2 FY21 earnings, makes $17.9 billion profits

Microsoft today announced their FY Q2 2021 results for the quarter ended December 31, 2020, and, as compared to the corresponding period of last fiscal year, the company delivered the following outstanding numbers:

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• Revenue was $43.1 billion and increased 17%
• Operating income was $17.9 billion and increased 29%
• Net income was $15.5 billion and increased 33%
• Diluted earnings per share was $2.03 and increased 34%

According to Zacks Consensus estimates, analysts are anticipating an EPS of $1.64 on sales of $40.12 billion, which would represent just over 8.5% year-over-year growth for both metrics. The results handily beat those expectations.

“What we have witnessed over the past year is the dawn of a second wave of digital transformation sweeping every company and every industry,” said Satya Nadella, chief executive officer of Microsoft. “Building their own digital capability is the new currency driving every organization’s resilience and growth. Microsoft is powering this shift with the world’s largest and most comprehensive cloud platform.”

“Accelerating demand for our differentiated offerings drove commercial cloud revenue to $16.7 billion, up 34% year over year,” said Amy Hood, executive vice president and chief financial officer of Microsoft. “We continue to benefit from our investments in strategic, high-growth areas.”

Highlights

Revenue in Productivity and Business Processes was $13.4 billion and increased 13% (up 11% in constant currency), with the following business highlights:

• Office Commercial products and cloud services revenue increased 11% (up 9% in constant currency) driven by Office 365 Commercial revenue growth of 21% (up 20% in constant currency)
• Office Consumer products and cloud services revenue increased 7% (up 6% in constant currency) and Microsoft 365 Consumer subscribers increased to 47.5 million
• LinkedIn revenue increased 23% (up 22% in constant currency)
• Dynamics products and cloud services revenue increased 21% (up 18% in constant currency) driven by Dynamics 365 revenue growth of 39% (up 37% in constant currency)

Revenue in Intelligent Cloud was $14.6 billion and increased 23% (up 22% in constant currency), with the following business highlights:

• Server products and cloud services revenue increased 26% (up 24% in constant currency) driven by Azure revenue growth of 50% (up 48% in constant currency)

Revenue in More Personal Computing was $15.1 billion and increased 14% (up 13% in constant currency), with the following business highlights:

• Windows OEM revenue increased 1%
• Windows Commercial products and cloud services revenue increased 10% (up 8% in constant currency)
• Xbox content and services revenue increased 40% (up 38% in constant currency)
• Surface revenue increased 3% (up 1%in constant currency)
• Search advertising revenue excluding traffic acquisition costs increased 2% (up 1% in constant currency)

Gaming up 51%

The stellar results from the Xbox team were driven by strength from third-party titles, Xbox Game Pass subscriptions, and first-party titles.  Xbox Live now has more than 100 million monthly active users, while Game Pass now has more than 18 million subscribers.

Xbox hardware revenue grew 86% driven by the Xbox Series X/S launch and Gaming revenue grew 51% (up 50% CC).

Windows OEM revenue up only 1%

Despite the pandemic boost in PC sales, Windows OEM revenue grew only 1%, largely due to a Q4 2019 having unusual boost, due to Windows 7 End of Support.

Windows OEM Pro revenue declined 9%, likely due to reduced commercial buyers, while Windows OEM non-Pro revenue grew 24%, likely due to consumers buying laptops for themselves and their children for home work and study.

Windows Commercial products and cloud services revenue grew 10% (up 8% CC) driven by demand for Microsoft 365.

Azure

Server products and cloud services revenue grew 26% (up 24% CC)

Azure revenue grew 50% (up 48% CC), driven by strong demand for consumption-based services.

Server products revenue grew 4% (up 3% CC) driven by hybrid and premium solutions, partially offset by continued transactional weakness as well as a strong prior year comparable that included roughly 4 points of benefit from the end of support for Windows Server 2008

Enterprise Mobility installed base grew 29% to over 163 million seats

Enterprise Services revenue grew 5% (up 4% CC) with growth in Premier Support Services.

Dividend

Microsoft returned $10 billion to shareholders in the form of share repurchases and dividends in the second quarter of fiscal year 2021, an increase of 18% compared to the second quarter of fiscal year 2020.

Microsoft’s share price was up more than 5% in after-hours trading on the results.

See Microsoft’s full earnings report here.

Source: Microsoft