Enterprise Gains Allow Microsoft to Beat Street Expectations in Q1
While there was no new CEO announcement — not that one was expected — Microsoft gave investors some reason to be happier today.
The software giant reported stronger-than-expected results in the first quarter, with revenue of $18.5 billion and net income of 62 cents per share. That compares to $16 billion in the same quarter a year ago and 53 cents a share in profits.
Analysts had expected earnings of 54 cents per share on revenue of $17.8 billion.
In a conference call with analysts after the results were announced, Microsoft CFO Amy Hood noted quite concisely that the quarter was “better than we had expected.”
Microsoft said of the performance that “robust enterprise sales and improving consumer demand drive broad-based growth.” It also noted that the financial results reflected the deferral of $113 million of revenue related to Windows 8.1 pre-sales.
“Our devices and services transformation is progressing and we are launching a wide range of compelling products and experiences this fall for both business and consumers,” said Microsoft CEO Steve Ballmer in a statement.
It was a nice thing to be able to announce in what could be Ballmer’s last quarter as leader at the company. The selection of a new leader to replace him is likely to take at least until the end of the year. While that could change, of course, a number of candidates — from an outsider like Ford CEO Alan Mulally to an insider such as Tony Bates — are still being considered and vetted.
And that’s why it’s going to be hard to know exactly what direction the company will actually take in the coming year, beyond Ballmer’s refocusing its strategy around “One Microsoft” and the devices-and-services meme.
But that doesn’t mean there will not be a lot to talk about, including upcoming releases such as a new Surface tablet, changes to its Windows operating system and the launch of the Xbox One.
The upcoming products follow a time of massive change at Microsoft, including the Ballmer reorg and departure news, and also the $7 billion acquisition of Nokia’s phone-and-devices business to bolster Windows Phone’s fight to survive in a mobile world dominated by Apple and Google.
But today was about what happened in Q1. Details among the many divisions of Microsoft, which have changed recently following the restructuring by Ballmer:
Devices and Consumer revenue grew four percent to $7.46 billion.
Surface revenue grew to $400 million with sequential growth in revenue and units sold over the prior quarter.
Search advertising revenue grew 47 percent driven by an increase in revenue per search and volume.
Commercial revenue grew 10 percent to $11.2 billion.
Commercial cloud revenue grew 103 percent.
Analysts will be looking closely at the revenue for Microsoft’s cloud business, as it transitions its products.
Microsoft shares rose six percent in after-hours trading on the news of the stronger financial performance.
Here are all the details in Microsoft’s Q1 financial statements and press release: