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Microsoft (MSFT) Q4 Earnings & Revenues Beat on Cloud Success
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Microsoft (MSFT - Free Report) reported fourth-quarter fiscal 2024 earnings of $2.95 per share, which beat the Zacks Consensus Estimate by 1.72% and improved 9.7% on a year-over-year basis. At constant currency (cc), earnings increased 11% year over year.
Revenues of $64.7 billion increased 15.2% year over year and beat the Zacks Consensus Estimate by 0.84%. At cc, revenues grew 16% year over year.
Commercial bookings were significantly ahead of expectations and increased 17% year over year and 19% at cc. This was driven by growth in the number of 10-million-dollar-plus and 100-million-dollar-plus contracts for both Azure and Microsoft 365 and consistent execution across the core annuity sales motions.
Commercial remaining performance obligation increased 20% year over year (up 21% at cc) to $269 billion. Roughly 45% will be recognized in revenues in the next 12 months, up 20% year over year. The remaining portion, which will be recognized beyond the next 12 months, increased 21%. In the reported quarter, the annuity mix was 97%.
Microsoft Cloud revenues were $36.8 billion, which jumped 21% (up 22% at cc) year over year and was roughly in line with expectations.
Microsoft Corporation Price, Consensus and EPS Surprise
The Productivity & Business Processes segment, which includes the Office and Dynamics CRM businesses, contributed 31.4% to total revenues. Revenues increased 11% (up 12% at cc) on a year-over-year basis to $20.3 billion, slightly ahead of expectations driven by better-than-expected results across all business units. The reported figure beat the consensus mark by 1.06%.
Office commercial products and cloud services revenues grew 12% (up 13% at cc). Office 365 commercial revenues increased 13% (up 14% at cc), with ARPU growth primarily from E5 momentum as well as Copilot for Microsoft 365.
Teams Premium has surpassed three million seats, up nearly 400% year over year, as organizations like dentsu, Eli Lilly and Ford chose it for advanced features like end-to-end encryption and real-time translation.
Paid Office 365 commercial seats grew 7% year over year, with installed base expansion across all customer segments. Seat growth was driven by small and medium business and frontline worker offerings, although both segments continued to moderate.
Office commercial licensing declined 9% and 7% at cc, with continued customer shift to cloud offerings.
Office consumer revenues increased 3% (up 4% at cc), with continued momentum in Microsoft 365 subscriptions, which grew 10% to 82.5 million.
LinkedIn revenues rose 10% (up 9% at cc), driven by better-than-expected performance across all businesses, including Talent Solutions, Marketing Solutions, Premium Subscriptions and Sales Solutions. LinkedIn sessions grew 13% with record engagement.
LinkedIn continues to see accelerated member growth and record engagement. Markedly, 1.5 million pieces of content are shared every minute on the platform and video is now the fastest-growing format on LinkedIn, with uploads increasing 34% year over year. Premium sign-ups soared 51% this fiscal year.
Dynamics revenues jumped 16% year over year, driven by Dynamics 365 which grew 19% and 20% in cc. Microsoft witnessed continued growth across all workloads and better-than-expected new business. Dynamics 365 now represents roughly 90% of total Dynamics revenues.
The Intelligent Cloud segment, including server and enterprise products and services, contributed 44.1% to total revenues. The segment reported revenues of $28.5 billion, which increased 19% year over year (up 20% at cc) but missed the consensus mark by 0.53%.
Server products and cloud services revenues jumped 21% (up 22% at cc), driven by Azure and other cloud services revenue growth of 29% (up 30% at cc), including roughly 8 points from AI services where demand remained higher than available capacity.
In per-user business, the enterprise mobility and security installed base grew 10% to more than 281 million seats, with continued impact from moderated growth in seats sold outside the Microsoft 365 suite.
In the on-premises server business, revenues rose 2% (up 3% in cc), driven by demand for its hybrid solutions although with slightly lower-than-expected transactional purchasing.
Enterprise and partner services revenues decreased 7% on a strong prior-year comparable for Enterprise Support Services.
More Personal Computing segment, which primarily comprises Windows, Gaming, Devices and Search businesses, contributed 24.6% to total revenues. Revenues increased 14% year over year (up 15% at cc) to $15.9 billion and beat the Zacks Consensus Estimate by 3.13%. The growth included 12 points of net impact from the Activision acquisition. Results were above expectations driven by Windows commercial and Search.
Windows OEM revenues increased 4% year over year, primarily driven by the slightly better PC market.
Windows Commercial products and cloud services revenues grew 11% (up 12% at cc), which was ahead of expectations due to higher in-period revenue recognition from the mix of contracts.
Devices revenues plunged 11% (down 9% at cc) as the company remained focused on higher-margin premium products.
Search and news advertising revenues ex-TAC climbed 19%, which was ahead of expectations, primarily due to improved execution. Healthy volume growth was driven by Bing and Edge.
Gaming revenues soared 44%, with 48 points of net impact from the Activision acquisition. The company now has more than 500 million monthly active users across platforms and devices.
The company previewed a record 30 new titles at a showcase in the reported quarter. 18 of them, such as Call of Duty: Black Ops 6, will be available on Game Pass. Game Pass Ultimate subscribers can now stream games directly on the devices they already have, including as of last month, Amazon Fire TVs.
Xbox content and services revenues surged 61%, driven by 58 points of net impact from the Activision acquisition. Stronger-than-expected performance in first-party content was partially offset by third-party content performance. Xbox hardware revenues declined 42% (down 41% at cc).
At a company level, Activision contributed a net impact of approximately 3 points to revenue growth, which was a 2-point drag on operating income growth and had a negative 6 cents impact on earnings per share. A reminder that this net impact includes adjusting for the movement of Activision content from the company’s prior relationship as a third-party partner to first-party, and also includes $938 million from purchase accounting adjustments, integration and transaction-related costs.
Azure Reigns Supreme in Microsoft's Impressive Fiscal Q4 Financials
Microsoft offers the most diverse selection of AI accelerators, including the latest from NVIDIA (NVDA - Free Report) and AMD, as well as the company’s own first-party silicon. MSFT’s AI innovation continues to build on its strategic partnership with OpenAI.
Azure OpenAI Service provides access to best-in-class frontier models, including, as of this quarter, GPT-4o and GPT-4o mini. It is being used by leading companies in every industry, including H&R Block, Suzuki, Swiss Re and Telstra, as well as digital natives like Freshworks, Meesho and Zomato.
With Phi-3, Microsoft is offering a family of powerful, small language models, which are being used by companies like BlackRock, Emirates, Epic, ITC, Navy Federal Credit Union and others.
The company also continues to innovate and partner broadly to bring customers the best selection of frontier models and open-source models, LLMs and SLMs.
Microsoft’s Models as a Service offering makes it easy for developers to use LLMs and SLMs without having to manage any underlying infrastructure. Hundreds of paid customers, from Accenture and EY to Schneider Electric, are using it to take advantage of API access to third-party models, including the latest from Cohere, Meta and Mistral. The number of paid Models as a Service customers more than doubled quarter over quarter, with increased usage by leaders in every industry, from Adobe and Bridgestone to Novo Nordisk and Palantir.
With Azure AI, Microsoft is building out the app server for the AI wave, providing access to the most diverse selection of models to meet customers’ unique cost, latency and design considerations.
Microsoft is using the Azure VMware Solution to offer the fastest and most cost-effective way for customers to migrate their VMware workloads too.
The number of Azure AI customers and average spending continues to grow. The company has more than 60,000 Azure AI customers, up nearly 60% year over year.
Microsoft witnessed an acceleration of revenues from migrations to Azure. Azure Arc is helping customers in every industry, from ABB and Cathay Pacific to LALIGA, to streamline their cloud migrations. MSFT now has 36,000 Arc customers, up 90% year over year.
Microsoft remains the hyperscale cloud of choice for SAP and Oracle (ORCL - Free Report) workloads. Atos, Coles, Daimler Truck AG, Domino’s and Haleon migrated their mission-critical SAP workloads to Azure.
MSFT is also encouraged by the momentum in its next-generation analytics platform, Microsoft Fabric. Fabric now has more than 14,000 paid customers, including leaders in every industry, from Accenture and Kroger to Rockwell Automation and Zeiss, which increased 20% quarter over quarter.
In the fiscal fourth quarter, Microsoft introduced new first-of-their-kind real-time intelligence capabilities in Fabric so customers can unlock insights on high-volume and time-sensitive data.
Microsoft's AI Gamble Pays Off: Copilot Adoption Soars in Q4
GitHub Copilot is bending the productivity curve for developers. Just over two years since its general availability, more than 77,000 organizations — from BBVA, FedEx and H&M to Infosys and Paytm — have adopted Copilot, up 180% year over year.
With Copilot Workspace, Microsoft is offering Copilot-native end-to-end developer productivity across plan, build, test, debug and deploy cycles. Copilot is driving GitHub growth, and GitHub’s annual revenue run rate is now $2 billion. Markedly, Copilot accounted for more than 40% of GitHub’s revenue growth in fiscal 2024.
Microsoft is also integrating generative AI across Power Platform, enabling anyone to use natural language to create apps, automate workflows, or build a website. To date, more than 480,000 organizations have used AI-powered capabilities in Power Platform, up 45% quarter over quarter. In total, Microsoft now has 48 million monthly active users of Power Platform, up 40% year over year.
Copilot for Microsoft 365 is becoming a daily habit for knowledge workers, as it transforms work, workflow and work artifacts. The number of people who use Copilot daily at work nearly doubled quarter over quarter. Copilot customers increased more than 60% quarter over quarter.
The number of customers with over 10,000 seats more than doubled quarter over quarter, including Capital Group, Disney, Dow, Kyndryl and Novartis while EY alone will deploy Copilot to 150,000 of its employees.
New Team Copilot can facilitate meetings, and create and assign tasks. With Copilot Studio, customers can extend Copilot for Microsoft 365 and build custom copilots that proactively respond to data and events using their own first and third-party business data. To date, 50,000 organizations — from Carnival Corp., Cognizant and Eaton to KPMG, Majesco and McKinsey — have used Copilot Studio, up more than 70% quarter over quarter.
Microsoft is also extending Copilot to specific industries, including healthcare, with DAX Copilot. More than 400 healthcare organizations, including Community Health Network, Intermountain, Northwestern Memorial Healthcare and Ohio State University Wexner Medical Center, have purchased DAX Copilot to date, up more than 40% quarter over quarter. The number of AI-generated clinical reports more than tripled.
The new Dynamics 365 Contact Center is a Copilot-first solution that infuses generative AI throughout the contact center workflow. Companies like 1-800 Flowers, Mediterranean Shipping and Synoptek will rely on it to deliver better customer support. Dynamics 365 Business Central is now trusted by more than 40,000 organizations for core ERP.
More than 1,000 paid customers have used Copilot for Security, including Alaska Airlines, Oregon State University, Petrofac, Wipro and WTW. Microsoft now has more than 1.2 million security customers. More than 800,000, including Dell Technologies (DELL - Free Report) , Deutsche Telekom and TomTom, use four or more workloads, up 25% year over year.
Microsoft continues to drive record engagement with Copilot for the web. Consumers have used Copilot to create more than 12 billion images and conduct 13 billion chats to date, up 150% since the start of the calendar year.
Operating Results
Gross profit increased 14.3% year over year to $45.04 billion. The gross margin contracted 50 basis points (bps) to 69.6% on a year-over-year basis. Microsoft Cloud’s gross margin decreased roughly 2 points year over year to 69%, which was in line with expectations.
Operating expenses rose 13.1% year over year to $17.11 billion, with 9 points from the Activision acquisition.
Operating income of $27.92 billion increased 15.1% (up 16% at cc) and operating margins were 43%, which remained unchanged year over year.
Productivity & Business Process operating income rose 12.1% to $10.14 billion, beating the Zacks Consensus Estimate by 2.23%.
Intelligent Cloud operating income increased 22.2% to $12.85 billion, beating the consensus mark by 3.13%.
More Personal Computing’s operating income increased 5.3% to $4.92 billion, which missed the consensus mark by 9.38%.
Balance Sheet & Cash Flow
As of Jun 30, 2024, Microsoft had total cash, cash equivalents and short-term investments balance of $75.54 billion compared with $80.02 billion as of Mar 31, 2024.
As of Jun 30, 2024, long-term debt (including the current portion) was $44.9 billion compared with $42.6 billion as of Mar 31, 2024.
Cash flow from operations was $37.2 billion, up 29%, driven by strong cloud billings and collections. Free cash flow was $23.3 billion, up 18% year over year, reflecting higher capital expenditures to support cloud and AI offerings.
In the reported quarter, the company returned $8.4 billion to shareholders in the form of share repurchases and dividends payouts ($5.57 billion).
Guidance
For the fiscal first quarter, Microsoft expects the cost of revenues between $19.95 billion and $20.15 billion and operating expenses to grow in the $15.2-$15.3 billion range. Other income and expenses are expected to be roughly $(650) million.
The company expects revenue growth in the productivity and business processes segment between $20.3 billion and $20.6 billion.
MSFT expects Office 365 Commercial revenue growth to be roughly 14% at cc. Office Commercial products revenues are expected to decline in the mid-to-high teens.
In Office Consumer products and cloud services, Microsoft expects revenue growth in the low-to-mid single digits. For LinkedIn, the company expects revenue growth in the low-to-mid single digits. In Dynamics, MSFT expects revenue growth in the low-to-mid teens.
For Intelligent Cloud, Microsoft anticipates revenues between $28.6 billion and $28.9 billion.
In Azure, MSFT expects revenue growth at cc between 28% and 29%. In Enterprise Services, revenues are expected to decline in the low single digits. The company expects Server product revenues to decline in the low single digits.
For More Personal Computing, the company projects revenues between $14.9 billion and $15.3 billion. It expects Windows OEM revenues to remain relatively flat year over year.
Image: Bigstock
Microsoft (MSFT) Q4 Earnings & Revenues Beat on Cloud Success
Microsoft (MSFT - Free Report) reported fourth-quarter fiscal 2024 earnings of $2.95 per share, which beat the Zacks Consensus Estimate by 1.72% and improved 9.7% on a year-over-year basis. At constant currency (cc), earnings increased 11% year over year.
Revenues of $64.7 billion increased 15.2% year over year and beat the Zacks Consensus Estimate by 0.84%. At cc, revenues grew 16% year over year.
Commercial bookings were significantly ahead of expectations and increased 17% year over year and 19% at cc. This was driven by growth in the number of 10-million-dollar-plus and 100-million-dollar-plus contracts for both Azure and Microsoft 365 and consistent execution across the core annuity sales motions.
Commercial remaining performance obligation increased 20% year over year (up 21% at cc) to $269 billion. Roughly 45% will be recognized in revenues in the next 12 months, up 20% year over year. The remaining portion, which will be recognized beyond the next 12 months, increased 21%. In the reported quarter, the annuity mix was 97%.
Microsoft Cloud revenues were $36.8 billion, which jumped 21% (up 22% at cc) year over year and was roughly in line with expectations.
Microsoft Corporation Price, Consensus and EPS Surprise
Microsoft Corporation price-consensus-eps-surprise-chart | Microsoft Corporation Quote
Segmental Details
The Productivity & Business Processes segment, which includes the Office and Dynamics CRM businesses, contributed 31.4% to total revenues. Revenues increased 11% (up 12% at cc) on a year-over-year basis to $20.3 billion, slightly ahead of expectations driven by better-than-expected results across all business units. The reported figure beat the consensus mark by 1.06%.
Office commercial products and cloud services revenues grew 12% (up 13% at cc). Office 365 commercial revenues increased 13% (up 14% at cc), with ARPU growth primarily from E5 momentum as well as Copilot for Microsoft 365.
Teams Premium has surpassed three million seats, up nearly 400% year over year, as organizations like dentsu, Eli Lilly and Ford chose it for advanced features like end-to-end encryption and real-time translation.
Paid Office 365 commercial seats grew 7% year over year, with installed base expansion across all customer segments. Seat growth was driven by small and medium business and frontline worker offerings, although both segments continued to moderate.
Office commercial licensing declined 9% and 7% at cc, with continued customer shift to cloud offerings.
Office consumer revenues increased 3% (up 4% at cc), with continued momentum in Microsoft 365 subscriptions, which grew 10% to 82.5 million.
LinkedIn revenues rose 10% (up 9% at cc), driven by better-than-expected performance across all businesses, including Talent Solutions, Marketing Solutions, Premium Subscriptions and Sales Solutions. LinkedIn sessions grew 13% with record engagement.
LinkedIn continues to see accelerated member growth and record engagement. Markedly, 1.5 million pieces of content are shared every minute on the platform and video is now the fastest-growing format on LinkedIn, with uploads increasing 34% year over year. Premium sign-ups soared 51% this fiscal year.
Dynamics revenues jumped 16% year over year, driven by Dynamics 365 which grew 19% and 20% in cc. Microsoft witnessed continued growth across all workloads and better-than-expected new business. Dynamics 365 now represents roughly 90% of total Dynamics revenues.
The Intelligent Cloud segment, including server and enterprise products and services, contributed 44.1% to total revenues. The segment reported revenues of $28.5 billion, which increased 19% year over year (up 20% at cc) but missed the consensus mark by 0.53%.
Server products and cloud services revenues jumped 21% (up 22% at cc), driven by Azure and other cloud services revenue growth of 29% (up 30% at cc), including roughly 8 points from AI services where demand remained higher than available capacity.
In per-user business, the enterprise mobility and security installed base grew 10% to more than 281 million seats, with continued impact from moderated growth in seats sold outside the Microsoft 365 suite.
In the on-premises server business, revenues rose 2% (up 3% in cc), driven by demand for its hybrid solutions although with slightly lower-than-expected transactional purchasing.
Enterprise and partner services revenues decreased 7% on a strong prior-year comparable for Enterprise Support Services.
More Personal Computing segment, which primarily comprises Windows, Gaming, Devices and Search businesses, contributed 24.6% to total revenues. Revenues increased 14% year over year (up 15% at cc) to $15.9 billion and beat the Zacks Consensus Estimate by 3.13%. The growth included 12 points of net impact from the Activision acquisition. Results were above expectations driven by Windows commercial and Search.
Windows OEM revenues increased 4% year over year, primarily driven by the slightly better PC market.
Windows Commercial products and cloud services revenues grew 11% (up 12% at cc), which was ahead of expectations due to higher in-period revenue recognition from the mix of contracts.
Devices revenues plunged 11% (down 9% at cc) as the company remained focused on higher-margin premium products.
Search and news advertising revenues ex-TAC climbed 19%, which was ahead of expectations, primarily due to improved execution. Healthy volume growth was driven by Bing and Edge.
Gaming revenues soared 44%, with 48 points of net impact from the Activision acquisition. The company now has more than 500 million monthly active users across platforms and devices.
The company previewed a record 30 new titles at a showcase in the reported quarter. 18 of them, such as Call of Duty: Black Ops 6, will be available on Game Pass. Game Pass Ultimate subscribers can now stream games directly on the devices they already have, including as of last month, Amazon Fire TVs.
Xbox content and services revenues surged 61%, driven by 58 points of net impact from the Activision acquisition. Stronger-than-expected performance in first-party content was partially offset by third-party content performance. Xbox hardware revenues declined 42% (down 41% at cc).
At a company level, Activision contributed a net impact of approximately 3 points to revenue growth, which was a 2-point drag on operating income growth and had a negative 6 cents impact on earnings per share. A reminder that this net impact includes adjusting for the movement of Activision content from the company’s prior relationship as a third-party partner to first-party, and also includes $938 million from purchase accounting adjustments, integration and transaction-related costs.
Azure Reigns Supreme in Microsoft's Impressive Fiscal Q4 Financials
Microsoft offers the most diverse selection of AI accelerators, including the latest from NVIDIA (NVDA - Free Report) and AMD, as well as the company’s own first-party silicon. MSFT’s AI innovation continues to build on its strategic partnership with OpenAI.
Azure OpenAI Service provides access to best-in-class frontier models, including, as of this quarter, GPT-4o and GPT-4o mini. It is being used by leading companies in every industry, including H&R Block, Suzuki, Swiss Re and Telstra, as well as digital natives like Freshworks, Meesho and Zomato.
With Phi-3, Microsoft is offering a family of powerful, small language models, which are being used by companies like BlackRock, Emirates, Epic, ITC, Navy Federal Credit Union and others.
The company also continues to innovate and partner broadly to bring customers the best selection of frontier models and open-source models, LLMs and SLMs.
Microsoft’s Models as a Service offering makes it easy for developers to use LLMs and SLMs without having to manage any underlying infrastructure. Hundreds of paid customers, from Accenture and EY to Schneider Electric, are using it to take advantage of API access to third-party models, including the latest from Cohere, Meta and Mistral. The number of paid Models as a Service customers more than doubled quarter over quarter, with increased usage by leaders in every industry, from Adobe and Bridgestone to Novo Nordisk and Palantir.
With Azure AI, Microsoft is building out the app server for the AI wave, providing access to the most diverse selection of models to meet customers’ unique cost, latency and design considerations.
Microsoft is using the Azure VMware Solution to offer the fastest and most cost-effective way for customers to migrate their VMware workloads too.
The number of Azure AI customers and average spending continues to grow. The company has more than 60,000 Azure AI customers, up nearly 60% year over year.
Microsoft witnessed an acceleration of revenues from migrations to Azure. Azure Arc is helping customers in every industry, from ABB and Cathay Pacific to LALIGA, to streamline their cloud migrations. MSFT now has 36,000 Arc customers, up 90% year over year.
Microsoft remains the hyperscale cloud of choice for SAP and Oracle (ORCL - Free Report) workloads. Atos, Coles, Daimler Truck AG, Domino’s and Haleon migrated their mission-critical SAP workloads to Azure.
MSFT is also encouraged by the momentum in its next-generation analytics platform, Microsoft Fabric. Fabric now has more than 14,000 paid customers, including leaders in every industry, from Accenture and Kroger to Rockwell Automation and Zeiss, which increased 20% quarter over quarter.
In the fiscal fourth quarter, Microsoft introduced new first-of-their-kind real-time intelligence capabilities in Fabric so customers can unlock insights on high-volume and time-sensitive data.
Microsoft's AI Gamble Pays Off: Copilot Adoption Soars in Q4
GitHub Copilot is bending the productivity curve for developers. Just over two years since its general availability, more than 77,000 organizations — from BBVA, FedEx and H&M to Infosys and Paytm — have adopted Copilot, up 180% year over year.
With Copilot Workspace, Microsoft is offering Copilot-native end-to-end developer productivity across plan, build, test, debug and deploy cycles. Copilot is driving GitHub growth, and GitHub’s annual revenue run rate is now $2 billion. Markedly, Copilot accounted for more than 40% of GitHub’s revenue growth in fiscal 2024.
Microsoft is also integrating generative AI across Power Platform, enabling anyone to use natural language to create apps, automate workflows, or build a website. To date, more than 480,000 organizations have used AI-powered capabilities in Power Platform, up 45% quarter over quarter.
In total, Microsoft now has 48 million monthly active users of Power Platform, up 40% year over year.
Copilot for Microsoft 365 is becoming a daily habit for knowledge workers, as it transforms work, workflow and work artifacts. The number of people who use Copilot daily at work nearly doubled quarter over quarter. Copilot customers increased more than 60% quarter over quarter.
The number of customers with over 10,000 seats more than doubled quarter over quarter, including Capital Group, Disney, Dow, Kyndryl and Novartis while EY alone will deploy Copilot to 150,000 of its employees.
New Team Copilot can facilitate meetings, and create and assign tasks. With Copilot Studio, customers can extend Copilot for Microsoft 365 and build custom copilots that proactively respond to data and events using their own first and third-party business data. To date, 50,000 organizations — from Carnival Corp., Cognizant and Eaton to KPMG, Majesco and McKinsey — have used Copilot Studio, up more than 70% quarter over quarter.
Microsoft is also extending Copilot to specific industries, including healthcare, with DAX Copilot. More than 400 healthcare organizations, including Community Health Network, Intermountain, Northwestern Memorial Healthcare and Ohio State University Wexner Medical Center, have purchased DAX Copilot to date, up more than 40% quarter over quarter. The number of AI-generated clinical reports more than tripled.
The new Dynamics 365 Contact Center is a Copilot-first solution that infuses generative AI throughout the contact center workflow. Companies like 1-800 Flowers, Mediterranean Shipping and Synoptek will rely on it to deliver better customer support. Dynamics 365 Business Central is now trusted by more than 40,000 organizations for core ERP.
More than 1,000 paid customers have used Copilot for Security, including Alaska Airlines, Oregon State University, Petrofac, Wipro and WTW. Microsoft now has more than 1.2 million security customers. More than 800,000, including Dell Technologies (DELL - Free Report) , Deutsche Telekom and TomTom, use four or more workloads, up 25% year over year.
Microsoft continues to drive record engagement with Copilot for the web. Consumers have used Copilot to create more than 12 billion images and conduct 13 billion chats to date, up 150% since the start of the calendar year.
Operating Results
Gross profit increased 14.3% year over year to $45.04 billion. The gross margin contracted 50 basis points (bps) to 69.6% on a year-over-year basis. Microsoft Cloud’s gross margin decreased roughly 2 points year over year to 69%, which was in line with expectations.
Operating expenses rose 13.1% year over year to $17.11 billion, with 9 points from the Activision acquisition.
Operating income of $27.92 billion increased 15.1% (up 16% at cc) and operating margins were 43%, which remained unchanged year over year.
Productivity & Business Process operating income rose 12.1% to $10.14 billion, beating the Zacks Consensus Estimate by 2.23%.
Intelligent Cloud operating income increased 22.2% to $12.85 billion, beating the consensus mark by 3.13%.
More Personal Computing’s operating income increased 5.3% to $4.92 billion, which missed the consensus mark by 9.38%.
Balance Sheet & Cash Flow
As of Jun 30, 2024, Microsoft had total cash, cash equivalents and short-term investments balance of $75.54 billion compared with $80.02 billion as of Mar 31, 2024.
As of Jun 30, 2024, long-term debt (including the current portion) was $44.9 billion compared with $42.6 billion as of Mar 31, 2024.
Cash flow from operations was $37.2 billion, up 29%, driven by strong cloud billings and collections. Free cash flow was $23.3 billion, up 18% year over year, reflecting higher capital expenditures to support cloud and AI offerings.
In the reported quarter, the company returned $8.4 billion to shareholders in the form of share repurchases and dividends payouts ($5.57 billion).
Guidance
For the fiscal first quarter, Microsoft expects the cost of revenues between $19.95 billion and $20.15 billion and operating expenses to grow in the $15.2-$15.3 billion range. Other income and expenses are expected to be roughly $(650) million.
The company expects revenue growth in the productivity and business processes segment between $20.3 billion and $20.6 billion.
MSFT expects Office 365 Commercial revenue growth to be roughly 14% at cc. Office Commercial products revenues are expected to decline in the mid-to-high teens.
In Office Consumer products and cloud services, Microsoft expects revenue growth in the low-to-mid single digits. For LinkedIn, the company expects revenue growth in the low-to-mid single digits. In Dynamics, MSFT expects revenue growth in the low-to-mid teens.
For Intelligent Cloud, Microsoft anticipates revenues between $28.6 billion and $28.9 billion.
In Azure, MSFT expects revenue growth at cc between 28% and 29%. In Enterprise Services, revenues are expected to decline in the low single digits. The company expects Server product revenues to decline in the low single digits.
For More Personal Computing, the company projects revenues between $14.9 billion and $15.3 billion. It expects Windows OEM revenues to remain relatively flat year over year.
In Gaming, this Zacks Rank #3 (Hold) company expects revenue growth in the low-to-mid 30s. This includes roughly 40 points of net impact from the Activision acquisition. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Microsoft expects Xbox content and services revenue growth in the low-to-mid 50s range.