Microsoft (MSFT, Financial), one of the largest global software providers, reported solid fiscal fourth-quarter and full-year results, highlighted by strong cloud revenue growth.
Earnings report and webcast
The company reported net income of $6.5 billion and revenue of $23.3 billion for the quarter ending June 30. Both values outperformed prior-year quarter values by approximately $3 billion. While the company’s revenue slightly underperformed analyst estimates, the company’s earnings of 83 cents per share outperformed estimates by approximately 8 cents per share. These results were driven by double-digit revenue growth in the company’s Productivity and Business Process segment and Intelligent Cloud segment.
Productivity and Business Process revenues increased 21% year over year, driven by increasing Office 365 customer subscribers and strong revenue growth for both Office 365 and Dynamics 365. CEO Satya Nadella mentioned in the earnings call that Fortune 500 companies are switching to Office 365 and “looking to Microsoft and [the company’s] thriving partner ecosystem” to unlock new opportunities in “this era of intelligent cloud and intelligent edge.”
Intelligent Cloud revenues increased 11% year over year as Microsoft Azure revenues continue soaring. Chief Financial Officer Amy Hood mentioned in the earnings call that strong demand in the company’s “growing collection of integrated cloud services” accelerates Microsoft’s overall revenues throughout the past few years. The strong demand in Office 365 and Azure contributed to good revenue growth of approximately 5% per year during the past three years.
Microsoft reported revenues of $90 billion, operating income of $22.3 billion and net income of $21.2 billion for the 12 months ending June 30. According to Hood, the company increased commercial bookings by 30% during the past three months. Microsoft will continue to “invest in key areas,” including commercial cloud services, to meet customer demand and unlock shareholder value.
Company share price slightly increases
Microsoft’s share price increased just 0.49% despite providing a strong business outlook for fiscal 2018. The company’s operating and net margins outperform over 89% of global competitors even though the former is near a 10-year low of 19.41%.
Microsoft’s share price of $74.22 is near a 10-year high. The company’s stock also trades near its 10-year maximum price-sales valuation of $72.45. Despite this, the company still has good growth potential as its profitability ranks 7 out of 10.
Disclosure: No position in Microsoft.
