Microsoft (MSFT, Financial) has reported a significant rise in revenue across its various business sectors. The Productivity and Business Processes division saw revenue hit $29.9 billion, marking a 10% increase, or 13% when adjusted for constant currency. This boost was attributed to an 11% rise in Microsoft 365 Commercial products and cloud services, which grew by 14% in constant currency, and a 10% increase in Microsoft 365 Consumer products and cloud services, with a 12% growth in constant currency.
LinkedIn also contributed to this upswing with a 7% revenue increase, 8% when measured in constant currency. The Dynamics segment reported an 11% growth, driven by a 16% rise in Dynamics 365 revenue, which climbed 18% in constant currency.
In another highlight, Microsoft's Intelligent Cloud sector achieved $26.8 billion in revenue, growing by 21%, or 22% when adjusted for constant currency variances. Additionally, the More Personal Computing division recorded $13.4 billion in revenue, a 6% increase or 7% in constant currency. Within this sector, Windows OEM and Devices revenue rose by 3%, Xbox content and services revenue surged by 8%, and search and news advertising revenue, excluding traffic acquisition costs, climbed by 21%, with a 23% rise adjusted for constant currency.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 48 analysts, the average target price for Microsoft Corp (MSFT, Financial) is $485.41 with a high estimate of $650.00 and a low estimate of $420.00. The average target implies an upside of 22.52% from the current price of $396.19. More detailed estimate data can be found on the Microsoft Corp (MSFT) Forecast page.
Based on the consensus recommendation from 60 brokerage firms, Microsoft Corp's (MSFT, Financial) average brokerage recommendation is currently 1.8, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Microsoft Corp (MSFT, Financial) in one year is $496.44, suggesting a upside of 25.31% from the current price of $396.185. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Microsoft Corp (MSFT) Summary page.
MSFT Key Business Developments
Release Date: January 29, 2025
- Revenue: $69.6 billion, up 12% year-over-year.
- Gross Margin: Increased 13% and 12% in constant currency.
- Operating Income: Increased 17% and 16% in constant currency.
- Earnings Per Share (EPS): $3.23, an increase of 10%.
- Microsoft Cloud Revenue: $40.9 billion, grew 21% year-over-year.
- AI Business Annual Revenue Run Rate: Surpassed $13 billion, up 175% year-over-year.
- Commercial Bookings: Increased 67% and 75% in constant currency.
- Commercial Remaining Performance Obligation: $298 billion, up 34% and 36% in constant currency.
- Free Cash Flow: $6.5 billion, down 29% year-over-year.
- LinkedIn Revenue: Increased 9% year-over-year.
- Dynamics 365 Revenue: Increased 19% and 18% in constant currency.
- Azure and Other Cloud Services Revenue: Grew 31%, with AI services growing 157% year-over-year.
- Gaming Revenue: Decreased 7% and 8% in constant currency.
- Cash Flow from Operations: $22.3 billion, up 18% year-over-year.
- Return to Shareholders: $9.7 billion through dividends and share repurchases.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Microsoft Cloud revenue surpassed $40 billion for the first time, growing 21% year-over-year.
- AI business annual revenue run rate exceeded $13 billion, marking a 175% increase year-over-year.
- Strong commercial bookings growth of 67% and 75% in constant currency, driven by Azure commitments from OpenAI.
- Microsoft 365 Copilot saw significant adoption, with customers expanding their seats by more than 10x over the past 18 months.
- LinkedIn Premium surpassed $2 billion in annual revenue, with subscriber growth increasing nearly 50% over the past two years.
Negative Points
- Azure non-AI services growth was slightly lower than expected due to go-to-market execution challenges.
- On-premises server business revenue decreased 3%, slightly below expectations.
- Enterprise and partner services revenue decreased 1%, below expectations.
- Gaming revenue decreased 7% and 8% in constant currency, with hardware declines offsetting content and services growth.
- Free cash flow was down 29% year-over-year, reflecting higher capital expenditures.
