Microsoft Q4 2023 Earnings Review
$MSFT Q4'23 Results:
Financial Results:
⬆️$62,020M rev (+17.6% YoY, +12.8% LQ) beat est by 1.5%
⬆️GM (68.4%, +1.5%pp YoY)
⬆️Operating Margin (43.6%, +4.9%pp YoY)
⬆️Net Margin 35.3%, +4.1%pp YoY)
⬆️EPS $2.93 beat est by 5.4%
Segment Revenue
↘️Productivity and Business Processes $19,249M rev (+13.2% YoY, 53.4% Op Margin)🟡
↘️Intelligent Cloud $25,880M rev (+20.3% YoY, 48.1% Op Margin)🟢
⬆️Personal Computing $16.89B (+18.6% YoY)🟢
Product and Service Revenue
⬆️Microsoft Cloud (+24% YoY)
➡️Office Commercial products and cloud services (+15% YoY)
➡️Office 365 Commercial (+17% YoY)
➡️Office Consumer products and cloud services (+5% YoY)
➡️LinkedIn (+9% YoY)
⬆️Dynamics products and cloud services (+21% YoY)
⬆️Dynamics 365 (+27% YoY)
⬆️Server products and cloud services (+22% YoY)
⬆️Azure and other cloud services (+30% YoY)
➡️Windows (+9% YoY)
➡️Windows OEM (+11% YoY)
➡️Windows Commercial products and cloud services (+9% YoY)
↘️Devices (-9% YoY)
⬆️Xbox content and services (+61% YoY)
➡️Search and news advertising excluding traffic acquisition costs (+8% YoY)
Operating expenses
⬆️S&M*/Revenue 10.1% (9.2% LQ)
↘️R&D*/Revenue 11.5% (11.8% LQ)
⬆️G&A*/Revenue 3.2% (2.6% LQ)
Dilution
⬆️SBC/rev 5%, +0.1%pp QoQ)
⬆️Dilution at -0.3% YoY, +0.1%pp QoQ)🟢
Key points from Microsoft Corporation's $MSFT Q2 2024 Earnings Call:
1. Microsoft Cloud:
A record quarter was driven by Microsoft Cloud, surpassing $33 billion in revenue, up 24%, with AI as a key driver. The integration of AI across Microsoft's technology stack is attracting new customers and enhancing productivity.
2. Azure's Market Share:
Azure continues to gain market share, bolstered by its AI capabilities. Azure AI, with its diverse AI accelerators and models, has reached 53,000 customers, with one-third new to Azure.
3. OpenAI:
Over half of the Fortune 500, including Ally Financial, Coca-Cola, and Rockwell Automation, use Azure OpenAI.
4. Investments in AI Infrastructure:
There is a commitment to scaling cloud and AI investments while effectively driving efficiencies and managing costs.
5. Developer Tools:
GitHub's revenue has accelerated by over 40% year-over-year, with 1.3 million paid GitHub Copilot subscribers.
6. Business Applications:
Dynamics 365 continues to gain market share with AI-powered apps for marketing, sales, service, finance, and supply-chain functions.
7. Copilot Expansion:
Microsoft 365 Copilot is rapidly gaining adoption, and AI is expected to significantly transform work, offering up to 70% improvement in productivity for certain tasks.
8. Windows and Security:
Windows PCs with neural processing units showcased at CES are offering new AI experiences. Security remains a focus with advancements in Zero Trust architecture.
9. LinkedIn's Global Reach:
LinkedIn now assists over 1 billion members, with strong membership growth and skill-building features.
10. AI Transforming Search and Browser:
Significant milestones have been reached with images and chats, enhancing Edge browser capabilities.
11. Gaming:
Xbox set records in monthly active users. The Activision Blizzard acquisition has been included in the More Personal Computing segment, impacting Xbox content and services revenue growth metrics.
Management Comments on the Earnings Call:
Regarding AI:
"AI is the definitive technology of our time. Its ability to transform operations, customer experiences, and product development is unparalleled, but its real power lies in its capability to unlock human ingenuity." - Satya Nadella, CEO, Microsoft. "We’ve moved from talking about AI to applying AI at scale by infusing AI across every layer of our tech stack, we are winning new customers and helping drive new benefits and productivity gains," he noted.
About Microsoft Cloud:
"Microsoft Cloud is more than a collection of products and services. It's a robust ecosystem that empowers businesses to thrive in the digital age, fostering innovation, efficiency, and growth." - Amy Hood, CFO, Microsoft.
On GitHub's Role:
"GitHub is not just a repository; it's a crucible of collaboration and innovation. It represents a community where the next generation of software is being written, right now." - Satya Nadella, CEO, Microsoft.
Competitive Landscape:
"In today's dynamic market, our competitiveness is defined not just by what we do but by how quickly and effectively we adapt to evolving customer needs and technological advancements." - Amy Hood, CFO, Microsoft.
Leadership Philosophy:
"A growing body of evidence makes clear the role AI will play in transforming work. Our own research as well as external studies show as much as 70% improvement in productivity, using generative AI for specific work tasks." - Satya Nadella, CEO, Microsoft.