Microsoft beats earnings and revenue estimates, driven by cloud success

From Nasdaq: 2024-10-31 10:03:00

Microsoft reported first-quarter fiscal 2025 earnings of $3.3 per share, beating estimates by 10.4% and improving 16% year-over-year. Revenues of $65.58 billion increased 16% year-over-year. Commercial demand and growth in commitments to Microsoft Cloud platform drove results. Commercial bookings increased 30%. Remaining performance obligation increased 22% to $259 billion. Microsoft Cloud revenues were $38.9 billion, growing 22%.

Segmental Details: Productivity & Business Processes revenues increased 12%. Microsoft 365 Commercial products and cloud services revenues rose 13%. LinkedIn revenues increased 10%. Intelligent Cloud segment reported revenues of $24.1 billion, up 20%. Server products and cloud services revenues jumped 23%. More Personal Computing segment revenues increased 15%, with 15 points from the Activision acquisition.

Azure Boosts Microsoft’s Fiscal Q1 Financials: Azure Arc has over 39,000 customers. Microsoft has data centers in 60 regions. New Cobalt 100 VMs offer better price performance. Microsoft is innovating AI infrastructure and offering AI accelerators. Microsoft’s partnership with OpenAI is delivering results. Azure OpenAI usage has doubled in the past six months.

Microsoft’s AI Copilot Adoption Surges in Q1: GitHub Copilot is increasing developer productivity. Copilot Autofix helps fix vulnerabilities faster. Microsoft is expanding GitHub Copilot’s reach and bringing AI to Power Platform. Dynamics 365 continues to take share. Microsoft Teams usage remains high. Copilot+ PCs are winning new customers.

Operating Results: Gross profit increased 13.1% to $45.48 billion. Gross margin contracted to 69.4%. Operating expenses rose 12.1% to $14.9 billion. Operating income increased 14% with operating margins at 47%. Productivity & Business Process operating income rose 15.5%. Intelligent Cloud operating income increased 17.9%. More Personal Computing operating income decreased 4.3%.

Balance Sheet & Cash Flow: Microsoft had total cash of $78.42 billion. Long-term debt was $42.86 billion. Cash flow from operations was $34.2 billion. Free cash flow was $19.3 billion. Microsoft returned $9 billion to shareholders in dividends and share repurchases in Q1 2025.

Guidance: For Q2, Microsoft expects revenue growth in various segments. Office 365 Commercial revenue growth is expected to be 14%. Azure revenue growth is expected at 31-32%. More Personal Computing segment revenue is expected between $13.85-$14.25 billion. Gaming revenue is expected to decline in high-single digit.

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