Microsoft Corp. today announced the following results for the quarter ended December 31, 2019, as compared to the corresponding period of last fiscal year:
- Revenue was $36.9 billion and increased 14%
- Operating income was $13.9 billion and increased 35%
- Net income was $11.6 billion and increased 38% GAAP and 36% non-GAAP
- Diluted earnings per share was $1.51 and increased 40% GAAP and 37% non-GAAP
“We are innovating across every layer of our differentiated technology stack and leading in key secular areas that are critical to our customers’ success,” said Satya Nadella, chief executive officer of Microsoft. “Along with our expanding opportunity, we are working to ensure the technology we build is inclusive, trusted and creates a more sustainable world, so every person and every organization can benefit.”
The following table reconciles our financial results reported in accordance with generally accepted accounting principles (GAAP) to non-GAAP financial results. Additional information regarding our non-GAAP definition is provided below. All growth comparisons relate to the corresponding period in the last fiscal year.
| Three Months Ended December 31, | ||||
| ($ in millions, except per share amounts) | Revenue | Operating Income | Net Income | Diluted Earnings per Share |
| 2018 As Reported (GAAP) | $32,471 | $10,258 | $8,420 | $1.08 |
| Net Impact of the Tax Cuts and Jobs Act (TCJA) | – | – | 157 | 0.02 |
| 2018 As Adjusted (non-GAAP) | $32,471 | $10,258 | $8,577 | $1.10 |
| 2019 As Reported (GAAP) | $36,906 | $13,891 | $11,649 | $1.51 |
| Percentage Change Y/Y (GAAP) | 14% | 35% | 38% | 40% |
| Percentage Change Y/Y (non-GAAP) | 14% | 35% | 36% | 37% |
| Percentage Change Y/Y (non-GAAP) Constant Currency | 15% | 39% | 39% | 41% |
GAAP results include a net income tax charge related to the TCJA of $157 million for the second quarter of fiscal year 2019. This net income tax charge is excluded from our non-GAAP results.
Microsoft returned $8.5 billion to shareholders in the form of share repurchases and dividends in the second quarter of fiscal year 2020.
“Strong execution from our sales teams and partners drove Commercial Cloud revenue to $12.5 billion, up 39% year over year,” said Amy Hood, executive vice president and chief financial officer of Microsoft.
Revenue in Productivity and Business Processes was $11.8 billion and increased 17% (up 19% in constant currency), with the following business highlights:
- Office Commercial products and cloud services revenue increased 16% (up 18% in constant currency) driven by Office 365 Commercial revenue growth of 27% (up 30% in constant currency)
- Office Consumer products and cloud services revenue increased 19% (up 20% in constant currency) with continued growth in Office 365 Consumer subscribers to 37.2 million
- LinkedIn revenue increased 24% (up 26% in constant currency)
- Dynamics products and cloud services revenue increased 12% (up 15% in constant currency) driven by Dynamics 365 revenue growth of 42% (up 45% in constant currency)
Revenue in Intelligent Cloud was $11.9 billion and increased 27% (up 28% in constant currency), with the following business highlights:
- Server products and cloud services revenue increased 30% (up 32% in constant currency) driven by Azure revenue growth of 62% (up 64% in constant currency)
- Enterprise Services revenue increased 6% (up 7% in constant currency)
Revenue in More Personal Computing was $13.2 billion and increased 2% (up 3% in constant currency), with the following business highlights:
- Windows OEM revenue increased 18% (up 18% in constant currency)
- Windows Commercial products and cloud services revenue increased 25% (up 27% in constant currency)
- Surface revenue increased 6% (up 8% in constant currency)
- Search advertising revenue excluding traffic acquisition costs increased 6% (up 7% in constant currency)
- Xbox content and services revenue decreased 11% (down 9% in constant currency)
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.
Every quarter Microsoft delivers hundreds of products, either as new releases or services or as 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. Following 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. Office 365 Play My Emails in Outlook for iOS utilizes Cortana to catch up on what’s new in your inbox. With an intelligent read out of your emails, natural language interaction with Cortana, and a user interface, you can stay organized and get back to living life outside your inbox. Third-party calendar integration in Outlook.com allows users to add third-party calendar data to their personal calendar, enhancing an existing feature. New integrations with Burbio and TeamSnap enable users to effortlessly import their respective school calendars and organized youth sports calendars into their personal calendar. Auto-refresh and Historical Data in the Stock Data Type turn Excel into a more robust tool for tracking personal investments, enabling you to track the latest stock prices, trading volume, and other financial information without leaving Excel to search outside sources. Now with trusted, real-time data from Nasdaq and Refinitiv, this becomes even better.
Focus plan in MyAnalytics helps you establish a daily focus time routine. The focus plan offers you the flexibility to have daily focus time booked automatically based on your availability, or surface suggestions to book focus time manually as you work in Outlook. Live events in Yammer enables leaders to communicate broadly with their organization or bring members of a community together. You can schedule, deliver, and engage in live events in Yammer, featuring live and on-demand video and open discussion, question and answer. Live events in Yammer are available across web, mobile, and the Yammer app on iOS and Android. SharePoint home sites are an intelligent, integrated employee experience—a landing page—for organizations. They provide a dynamic, engaging, and personalized employee experience. Microsoft Project rolled out to customers worldwide and now offers a new subscription, Project Plan 1. The subscription plan is for teams that need the essential capabilities of managing projects like assigning tasks and dependencies and scheduling and tracking project work using lists, boards, and timelines. Sheet View on Excel for the web lets you create customized views in an Excel worksheet to sort and filter your data. You can filter to display only the records that are important to you without being affected by others collaborating in the document. All your cell-level edits propagate through the file regardless of your view.
Microsoft Teams Private channels enable users to create channels within existing teams that can be viewed and accessed by only select members of that team. Pinned channels allows users to keep important channels at the top of their teams list for easy access. Microsoft Whiteboard, the freeform digital canvas for collaboration, is now available on the web. It integrates with Microsoft Teams to allow people to ideate and collaborate on a range of workplace scenarios whether they’re in the same room or working remotely. New presenter and attendee controls allow meeting organizers to pre-define presenter and attendee roles for meeting participants. Designated presenters will have full control over the meeting, whereas participants in “attendee” role won’t have ability to share content, take control, mute or remove other participants, admit people waiting in the lobby, or start/stop recordings. Power Apps creators can now publish their apps as Microsoft Teams apps for easy use and access when working on Microsoft Teams. Admins can also publish these custom apps directly to their company’s app library in Microsoft Teams, making them more discoverable to users. Citrix VDI support. Together with Citrix, we are optimizing the performance of Microsoft Teams Calling and Meetings for Citrix virtual environments, allowing organizations to deliver a high-fidelity Microsoft Teams experience for an on-premises or Azure-hosted virtual desktop or application. Native Federation for 1:1 Chats with users outside your organization. Users in TeamsOnly mode can now enjoy the same familiar chat experience whether they are communicating with a colleague or someone outside their organization. An icon will appear next to the user’s name to indicate they are external. New enterprise Phone System capabilities are now available, including emergency calling, call queue functionality, administrative control, Phone System for Government customers like GCC High and DoD, as well as advanced functionalities like music on hold, call delegation, and voice mail management. Dynamic Emergency Calling for Direct Routing is now available as a part of Microsoft Teams Phone System. It uses the caller’s current location to route their emergency call to a Public Safety Answering Point (PSAP), a call center operated by the local government.
Windows The Windows 10 November 2019 Update includes enhancements for richer search integration and less disruptive OS updates. The Calls feature for the Your Phone app allows you to tap into your PC’s speakers, microphone, and larger screen for a richer calling experience. Now you can make and receive calls on your PC and transfer them between your devices. Currently exclusive to Android devices. Windows 10 version 1909 offers new capabilities and enhancements, intelligent security, simplified updates, flexible management, and enhanced productivity. Highlights include the new Windows Search experience in Explorer, the new cloud clipboard with history viewing, support for third-party digital assistants, processor enhancements, additional customization for kiosk mode, and more. Cloud-connected service Desktop Analytics helps IT professionals take a data-driven approach to their management of Windows endpoints. Secured-core PCs are the most secure Windows 10 devices out-of-the-box* with integrated hardware, firmware, software, and identity protection. Partnering with leading PC manufacturers and silicon vendors, Secured-core PCs are intended for users who handle mission-critical data in some of the most data-sensitive industries.
Security, Compliance, and Identity We recently introduced Azure Sentinel connectors for Zscaler, F5, Barracuda, Citrix, ExtraHop, One Identity, and Trend Micro, which supplement the existing connectors and support for industry standards, so that customers can gain insights across their security data to mitigate threats. Microsoft Cloud App Security and Azure Advanced Threat Protection (ATP) available for U.S. government GCC High customers. The release of these services delivers advanced security functionality for customers while enabling them to meet increased compliance and security standards. Any customer with any Azure Active Directory (AD) plan, including a free plan, can now use the Microsoft Authenticator app for secure, passwordless access to both Microsoft and non-Microsoft apps. With Azure AD and Microsoft Authenticator, enterprises can go passwordless for a great user experience and lower support costs while also implementing two-factor or multifactor authentication (MFA) for greater security. Microsoft Endpoint Manager is an integrated solution to centrally and securely manage all the endpoints in your technology estate. Bringing together Microsoft Intune and System Center Configuration Manager functionality and data—plus new intelligent actions and analytics—Endpoint Manager delivers seamless, end-to-end management for Windows, Android, and Apple devices, apps, and policies without the complexity of a migration or disruption to productivity. Sensitivity labeling in Outlook for mobile and automatic classification on Outlook on the web are available. We previously released built-in sensitivity labeling in Office apps for Windows and Mac (Word, PowerPoint, Excel, Outlook), iOS, and Android (Word, PowerPoint, Excel), enabling users to easily apply sensitivity labels to documents and emails. These capabilities have now been extended to Outlook for iOS and Android. Automatic classification based on content inspection is now available on Outlook on the web. Conversation reconstruction capability in Advanced eDiscovery threads Microsoft Teams messages into conversations, allowing you to efficiently review and export complete dialogues with context, not just individual messages. Tamper protection in Microsoft Defender ATP is designed to protect against malicious and unauthorized changes to security features, ensuring that endpoint security doesn’t go down. With this protection in place, customers can mitigate malware and threats that attempt to disable security protection features. With Microsoft Threat Experts on demand Microsoft Defender ATP customers can engage directly with Microsoft security analysts to get guidance and insights needed to better understand, prevent, and respond to complex threats in their environments. Campaign detection in Office 365 Advanced Threat Protection allows security teams to see the full phish campaign and derive key insights for further protection and hunting. Refreshed Azure Active Directory Identity Protection helps organizations detect and prevent identity risk through advanced risk insights and automated risk-based policies. New capabilities include an intuitive and integrated UX, integration across Microsoft ecosystems, new detections, powerful APIs, improved risk assessment, and servicewide alignment. Azure Active Directory entitlements management automates employee and partner access requests, approvals, auditing, and workflows. It is an important addition to Privileged Identity Management (PIM), Terms of Use, and Access Reviews to complete core cloud-based Identity Governance capabilities.
Dynamics 365 Dynamics 365 Fraud Protection is a cloud-based solution merchants can use in real time to help lower their costs related to combatting fraud, help increase their revenue by improving acceptance of legitimate transactions, reduce friction in customer experience, and integrate easily into their existing order management system and payment stack. This solution offers a global level of fraud insights using data sets from participating merchants that are processed with real-time machine learning to detect and mitigate evolving fraud schemes in a timely manner.
Dynamics 365 Supply Chain Management – Asset Management enables customers to maximize the life of their assets. Customers can: · Better maintain assets from acquisition to retirement by streamlining tracking and monitoring KPIs to improve the overall equipment effectiveness (OEE) of your mission-critical assets. · More effectively plan and predict maintenance to maximize the longevity and performance of high-value assets while reducing costs and production downtime. · Support of various types of maintenance—predictive, corrective, condition, and preventative—with a single solution. The new Dynamics 365 Customer Service digital messaging offering expands and unifies the core omnichannel capabilities for Customer Service. With digital messaging, you’re able to further empower contact centers to provide seamless, more personalized customer service across a wide range of channels (e.g., SMS, Bots, Facebook Messenger). Dynamics 365 Guides helps employees learn new skills faster with Dynamics 365 Guides on HoloLens devices—no coding required. Dynamics 365 Guides empowers employees with hands-on learning and will maximize their training effectiveness. In addition, it enables customer to use data to improve workflow efficiency.
Microsoft Power Platform Power Virtual Agents enables anyone to create powerful chatbots using a guided, no-code graphical interface, without the need for data scientists or developers. It removes the complexity of exposing teams to the nuances of conversational AI and the need to write complex code. It also minimizes the IT effort required to deploy and maintain a custom conversational solution by empowering subject-matter experts and departments to build and maintain their own conversational solutions. AI Builder is our new our low-code artificial intelligence (AI) platform that supports Microsoft Power Platform. AI Builder enables everyone to leverage AI and machine learning to make their apps and automations more intelligent. It takes common AI scenarios and provides point-and-click solutions for app makers to solve everyday tasks like forms processing, object detection, and text and binary classification. Power Apps Portals introduced a new ability in Power Apps to build low-code, responsive websites that allow external users to interact with the data stored in the Common Data Service. Using a simple, dedicated designer experience, makers can create custom-branded, pixel-perfect websites and allow users to interact with data stored in the Common Data Service.
LinkedIn LinkedIn Events allows members to seamlessly create and join professional events, invite their connections, manage their own events, have conversations with other attendees, and stay in touch after the event ends. Enhanced Targeting Tools were introduced to Campaign Manager, including sophisticated audience, targeting, and reporting features. These tools are designed to help marketers looking for more powerful reach and insights for their LinkedIn campaigns. Open for Business/Find A Service Provider rolled out globally to allow service providers/freelancers to list their services on their LinkedIn profiles, indicating they are “open for business.” A social share feature allows service providers/freelancers to easily indicate they are “open for business” with their network. Members looking for help can also filter their searches for service providers/freelancers to help them get the job done. This quarter, LinkedIn Pages introduced a new feature that help organizations leverage their most important asset—their employees. These updates help an organization’s employees share their company’s key updates or highlight their incredible work. It includes tools to help admins optimize their LinkedIn Page. LinkedIn Sales Solutions now combines the power of LinkedIn with the power of a customer’s CRM through a new feature called Data Validation. Also introduced were new usage reporting capabilities for Sales Navigator administrators, integrated Bing geography data to improve search results, two new Sales Navigator Application Platform partners Tableau and PowerBI, and an update to the Oracle Sales Cloud integration.
Azure Security and Management Azure Sentinel is a cloud-native SIEM with built-in AI that ingests data from your entire enterprise and imports Microsoft 365 security alerts for free. Just-in-time (JIT) VM access for Azure Firewall secures your Azure Firewall-protected environments, in addition to your NSG-protected environments, with just-in-time VM access. Just-in-time VM access reduces exposure to network volumetric attacks by providing controlled access to VMs only when needed, using your NSG and Azure Firewall rules. Azure Security Center Quick Fix for bulk resources simplifies remediation of security misconfigurations and quickly remediates recommendations on a bulk of resources. Azure Monitor for containers Prometheus integration can now scrape your Prometheus metrics and store them on your behalf, without you having to operate your own Prometheus collection and storage infrastructure. We also have new Grafana templates for you to visualize all the performance data collected from your Kubernetes clusters. Azure Monitor Workbooks allows you to combine text, analytic queries, metrics, and parameters into a rich interactive report you can share with your team members. We’ve added support for a number of new data sources, including Azure Data Explorer, Azure Resource Graph, Azure Monitor Logs, Metrics, and Alerts. In addition, there are new visualization options such as charts, grids, tiles, honeycombs, and maps. Azure Monitor Log Analytics data retention can now be configured for each data type, rather than only a single retention setting for the entire workspace.
Azure Data Azure Database for PostgreSQL – Hyperscale (Citus) scales out Postgres horizontally and is ideal for multitenant and SaaS applications that are growing fast, as well as for real-time analytics apps that need subsecond response times across billions of rows. Azure SQL Database serverless is a new compute tier that optimizes price-performance and simplifies performance management for databases with intermittent, unpredictable usage. Serverless automatically scales compute for single databases based on workload demand and bills for compute used per second. Azure Database for MariaDB support for intelligent performance is a performance set of features, which includes query store, query performance insight, and performance recommendations, and is now generally available. This set of features allows you to better understand your workloads, including visually inspecting them, and to identify bottlenecks. Reserved Capacity pricing is now available for Azure Database for MySQL, PostgreSQL, Single server, and MariaDB for your existing and future servers. Reserved Capacity allows customers to reserve compute power for existing and future database servers. Azure Database for MySQL now provides support for the latest major version of MySQL, version 8.0. Major enhancements in MySQL 8.0 include a variety of improvements associated with the data dictionary, atomic data definition statements (atomic Data Definition Language [DDL]), the upgrade procedure, security and account management, as well as several other performance enhancements. The Azure Cosmos DB API for MongoDB now supports MongoDB wire protocol. All new accounts provisioned using the Azure portal will have the option to provision with server version 3.6. Existing accounts will continue to be on v3.2 or v3.4 (based on their configuration) and will be fully supported. New capabilities include compound indexes, ChangeStream API support, creating unshared collections with shared database throughput, and general availability for aggregation pipeline stages and operators. All new accounts provisioned using the Azure portal will have the option to provision with server version 3.6.
Azure Analytics Azure SQL Data Warehouse is now Azure Synapse Analytics. Azure Synapse is a limitless analytics service that brings together enterprise data warehousing and Big Data analytics. It gives you the freedom to query data on your terms, using either serverless on-demand or provisioned resources—at scale. Azure Synapse brings these two worlds together with a unified experience to ingest, prepare, manage, and serve data for immediate business intelligence and machine learning needs.
Multiprotocol access on Azure Data Lake Storage Gen2 brings features like snapshots, soft delete, data tiering, and logging that are standard in the Blob world to the filesystem world of ADLS Gen2. Azure premium files allows customers to optimize their cloud-based file shares on Azure. Premium files offers a higher level of performance built on solid-state drives (SSD) for fully managed file services in Azure. Customers can now enable Azure Active Directory Domain Services authentication over SMB for Azure Files. You can manage Azure Files share-level access to an identity such as a user or group in Azure AD by using role-based access control (RBAC). Azure Files also supports preserving, inheriting, and enforcing NTFS DACLs on all files and directories in a file share. With the release of large file shares, a single standard file share in a general purpose Azure File account can now support up to 100 TiB capacity, 10K IOPS, and 300 MiB/s throughput.
Azure Serverless and App Dev Services Azure Kubernetes Service (AKS). Azure Availability Zone, multiple node pools, Cluster autoscaler, and authenticated IP capabilities help AKS customers protect applications and data against hardware failures and during planned maintenance events. The multiple node pools feature enables more efficient utilization of compute resources. It allows customers to use different virtual machine sizes in each pool to run various workloads in a single AKS cluster. Cluster autoscaling allows customers to precisely tune the cluster-scaling behavior of their environments to meet workload demand. Authenticated IP for AKS provides an extra layer of security by allowing customers to restrict access to their Kubernetes API server to trusted network locations. AKS now available in additional regions. For customers who need to operate at global scale, AKS is now available in four additional regions—the North United Arab Emirates, North Switzerland, West Switzerland, and West-Central Germany. AKS is available in 35+ regions, the highest of any cloud provider. Azure Functions Premium plan and PowerShell support eliminate cold-starts using pre-warmed instances, enables network isolation through VNET connectivity, and runs on more powerful instances with customized deployments. With PowerShell support in Azure Functions, customers can now use an event-driven approach for building automation scenarios and automate operational activities such as scheduling management tasks or automatically responding to events/alerts raised in different resources. Azure Migrate now provides a dedicated experience for migrating .NET and PHP web applications running on Windows to Azure App Service. It provides tooling in the form of a local agent that performs app discovery and general assessment of apps’ configuration settings, runs readiness checks, and then walks customers through the migration process The newly refreshed Azure API Management developer portal makes it easier to compose user interfaces with a visual editor and to access APIs for automating development, management, and deployment. It allows users to easily manage and catalog all APIs within their organizations, making it easier to find and reuse existing services. Additionally, it is open sourced and can be easily extended by development teams to meet bespoke requirements. GitHub Actions is used to automate software engineering workflows. GitHub Actions supports native GitHub events such as commits, code reviews, etc., but in addition supports building, testing, and deploying code with native CI/CD built into GitHub. GitHub Actions is unique in that it is supported via the GitHub community providing community-built Actions for many popular developer tools. GitHub Packages is a package hosting service, fully integrated with GitHub. GitHub Packages combines customers’ source code and packages in one place to provide integrated search, permissions management, and billing. Packages hosted on GitHub include all the information developers need—package contents, download statistics, and version history. GitHub Security Advisories allows repository maintainers to privately discuss and fix a security vulnerability in a project. After collaborating on a fix, repository maintainers can publish the security advisory to publicly disclose the security vulnerability to the project’s community. By publishing security advisories, repository maintainers make it easier for their community to update package dependencies and research the impact of the security vulnerabilities.
GitHub Advisory Database allows users to browse or search for the vulnerabilities that GitHub knows about. The database contains all curated Common Vulnerabilities and Exposures (CVEs) and security advisories that have been mapped to a package tracked by the GitHub dependency graph. CVE numbers will also automatically be linked from within issues and pull requests back to the GitHub Advisory Database.
Azure AI Personalizer is the industry’s first AI service based on reinforcement learning. It creates rich, personalized interactions for every user by prioritizing relevant content and experiences, improving app satisfaction, usability, and engagement. Azure Bot Service Direct Line Speech channel integrates with Language Understanding, Speech, and QnA Maker. After building a bot, onboarding it with Direct Line Speech will enable low-latency, high-reliability connection with client applications using the Speech SDK. These connections are optimized for voice-in, voice-out conversational experiences. ONNX Runtime releases v1.0 with stable public APIs. The open source cross-platform library for running deep learning AI models is used by various Microsoft teams in dozens of production scenarios on cloud and edge.
Azure IoT Azure IoT Edge is a fully managed service built on Azure IoT Hub that allow customers to deploy cloud workloads, such as artificial intelligence and Azure and third-party services, to run on Internet of Things (IoT) edge devices via standard containers. IoT Edge automatic deployments help customers handle the heavy lifting of deploying modules at scale. Azure Sphere is a comprehensive and unique IoT security solution that includes hardware, OS, and cloud components. In Q2 we announced a partnership with Qualcomm, which introduced the first cellular-enabled Azure Sphere-certified chip.