Microsoft beats Street forecast with 'record' quarterly revenue

The PC market suffered in the last calendar quarter, but you wouldn't know it by looking at Microsoft's latest financial results. The company has posted what it calls "record" revenue for the first quarter of its 2014 fiscal year. (That quarter ended on September 30.) According to Reuters, Microsoft "cruised past Wall Street's quarterly profit and revenue forecasts." Analysts had expected revenue of $17.8 billion, but Microsoft wound up posting just over $18.5 billion.

  Q1 FY'13 Q4 FY'13 Q1 FY'14
Revenue $16.01 billion $19.90 billion $18.53 billion
Net income $4.47 billion $4.97 billion $5.24 billion

Because of the sweeping internal reorganization announced by Steve Ballmer in July, we can't dig through past earnings releases to give you a quarter-by-quarter rundown of revenue for Microsoft's different business units. However, the latest earnings release compares Q1 FY'14 segment revenue to what I assume are estimates for the same quarter a year ago:

  Q1 FY'13 Q1 FY'14
Devices and Consumer Licensing $4.68 billion $4.34 billion
Devices and Consumer Hardware $1.08 billion $1.49 billion
Devices and Consumer Other $1.40 billion $1.64 billion
Commercial Licensing $8.95 billion $9.59 billion
Commercial Other $1.25 billion $1.60 billion
Corporate and Other -$1.35 billion -$131 million

The earnings release also includes a more digestible rundown of the key differences:

Devices and Consumer revenue grew 4% to $7.46 billion.

  • Windows OEM revenue declined 7%; Windows Pro revenue grew for the second consecutive quarter.
  • Surface revenue grew to $400 million with sequential growth in revenue and units sold over the prior quarter.
  • Search advertising revenue grew 47% driven by an increase in revenue per search and volume.

Commercial revenue grew 10% to $11.20 billion.

  • SQL Server revenue grew double-digits, with SQL Server Premium revenue growing more than 30%.
  • Lync, SharePoint, and Exchange, our productivity server offerings, collectively grew double-digits.
  • Commercial cloud revenue grew 103%.

I see some parallels with Intel's latest (and also forecast-beating) results here, with strong corporate sales buoying revenue growth. Intel saw a revenue decline on the PC side but growth on the data center side, while Microsoft saw a decline in consumer licensing but an uptick in commercial licensing. One key difference, of course, is that Microsoft also enjoyed growth in consumer hardware and advertising revenue.

What about the ongoing quarter? Microsoft didn't include a forecast in its earnings release, but it discussed expectations in its earnings conference call. According to SeekingAlpha's transcript, Microsoft is predicting "strong performance in our commercial business and ongoing improvement in our consumer business."

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