The numbers are in and Microsoft managed to beat market predictions which allowed the company to sit on a nice bump in stock in after-hour trading. For its Q2 2018 results, Microsoft announced revenues were up to the tune of $28.9 which is a net result of a 12% increase for the quarter as well as a 56% year-over-year cloud revenue growth that brought in $5.3 billion for the company.
Microsoft’s investment and company pivot toward cloud computing is paying off for shareholders who are now pocketing a pot of $5 billion in repurchased shares and dividends from the company.
Q2 2018 Revenue Results
As for the nitty-gritty of the specifics ups and downs of product lines and business categories, suffice to say, Microsoft was mainly buoyed by its Productivity and Business Processes division which saw 25% growth year over year and brought in $9 billion in revenue for the company.
The next shining star was Microsoft’s Intelligent Cloud business which maintains an impressive 15% growth margin as it brought in $7.8 billion in revenue for the quarter. Lastly, Microsoft’s More Personal Computing division, which is often weighed down by products such as stagnating Windows licensing and the botched Windows Phone experiment, still managed to eek out a 2% growth for the quarter and bring in $12.2 billion in revenue.
Looking between the numbers
Drilling a little bit deeper, we see that Microsoft ‘s highlights for the quarter include:
Productivity and Business Processes
- Office commercial products and cloud services revenue grew 10% driven by Office 365 commercial revenue growth of 41%
- Office consumer products and cloud services revenue grew 12% and Office 365 consumer subscribers increased to 29.2 million
- Dynamics products and cloud services revenue grew 10% driven by Dynamics 365 revenue growth of 67%.
- LinkedIn contributed revenue of $1.3 billion during the quarter with sessions growth over 20% for the 5th consecutive quarter. However, when Microsoft starts using obscure metrics such as sessions growth, it reminds me of Xbox. I’m just saying.
- Server products and cloud services revenue grew 18% which was driven by Azure revenue growth of 98%
- Enterprise Services revenue grew 5% driven by Premier Support Services
More Personal Computing (all the consumer stuff)
- Windows OEM revenue growth grew a modest 4% thanks to business licensing Pro versions of Windows at an 11% growth.
- Windows commercial products and cloud services revenue declined 4% due to the impact of an apparent larger deal the company made last year.
- Gaming revenue grew 8% thanks to having the Xbox One X on the market for the three months ending in December 2017.
- Search advertising revenue excluding traffic acquisition costs grew 15% driven by higher revenue per search and search volume.
- Surface revenue grew 1.5% despite the company selling less pieces of hardware in total.
As fellow writer and Microsoft reporter Mary Jo Foley points out, the company continues to show strong growth in its cloud revenue, but the level of growth is less mountain toppling and more hill jaunting as its sequential rate of growth have leveled by to the roughly 7% it was maintaining for the same quarter in 2017.
Despite offering new hardware for the Surface line, the company sold fewer units but at a higher price point which helped it eek out a 1% revenue gain. While not earth ending, it’s not a great sign coming out of the holiday buying season with three refreshed products lines and only marginal gains to show for it. Lastly, we’re still waiting to measure the LinkedIn acquisition as the YoY numbers begin to pair.
We continue to repeat the phrase that Microsoft’s investments in the cloud are paying off, and until either stop happening, we’ll continue to parrot it. Microsoft shows no signs of letting off the throttle for its cloud investments as it chases Amazon and there seems to be huge growth opportunities for businesses investing as much as them.Further reading: Azure, Cloud, Earnings, Microsoft, Office 365, Q2 2018, Surface, Xbox