Microsoft's FY18 Q3 Report: Office, Azure, Surface shine this quarter

The numbers are in and Microsoft rode a successful wave of transition and cloud-based software focus for the three months ending in March 31, 2018.

Microsoft just reported its FY18 Q3 earnings and most of its new key report identifiers were up across the board, including Office 365, Azure and Server products.

For the investors counting nickels and pennies, you should see a 37% increase YoY in your return as Microsoft returned $6.3 billion to shareholders in the form of dividends and share purchases this quarters, on the back of the following numbers:

  • Revenue was $26.8 billion and increased 16%
  • Operating income was $8.3 billion and increased 23%
  • Net income was $7.4 billion and increased 35%
  • Diluted earnings per share was $0.95 and increased 36%

Productivity and Business

Like I always say, let's get the veggies out of the way so we can enjoy the rest of the meal.

For those of us looking at a broader picture, Microsoft's single product/division investments show significant gains, with Office commercial products and cloud services revenue increases at 14%, and most of that growth powered by a 42% gain in Office 365 Commercial revenue growth, on the back of a healthy 30.6 million subscribers.

Microsoft's LinkedIn purchase is bearing fruit relatively early on with a 37% increase in revenue thanks to an increase in engagement on the platform to the tune of 30%. Perhaps, the addition of those seemingly frivolous social media features to the platform that industry observers mocked helped increase sessions growth to over 30%, or it could be the recent Outlook integrations as well.

For anyone interested, Microsoft's Dynamics products also saw a 17% increase fueled by the increase in Dynamics 365 usage over the year. The YoY revenue growth of Dynamics 365 alone was spotted at 65%, helping crest the wave of perhaps Microsoft least sexy product category.

Intelligent Cloud

Here is Microsoft's new product poster child:

A 17% increase YoY brought the company 7.6 billion in revenue for products such as Azure and Enterprise Services. More specifically, Server products and cloud services increased 20% on the whole thanks to Azure skyrocketing growth of 93% since this time last year. Microsoft's Enterprise Services, however, saw modest growth of 8%, bringing the "whaw whaw" to an already impressive Intelligent cloud growth party.

Personal Computing

All the stuff you and me care about:

While there is fear that Microsoft's attention may be slowly drifting away from this category, at the moment its producing gains rather difficult for the company to look away from. Even Windows OEM revenue, despite a downturn in PC purchases quarter over quarter, saw a 4% increase thanks to more businesses jumping on board and OEMs being able to sell more Pro licensed devices at an 11% increase YoY. Other Windows commercial products also saw a 21% revenue increase thanks to a mish-mosh of subscription-based services related to Windows.

Gaming revenue was up 18%, perhaps due in part to the addition of subscription services as the number of actual Xbox Live subscribers remained flat YoY. Microsoft credits the increase to "3rd party title strength," which makes sense since there have been few first-party titles to float console purchases over the past three months.

The Surface division is slowly returning to glory after a few flat quarters with an increase in revenue of 32% thanks in part to new devices and probably Surface Pro 3 owners now looking for upgrades.

Lastly, Bing is up a whopping 16%, but that's of a relatively small pond as market shareshare remained flat over the quarter.

Needless to say, Microsoft's cloud outlook (pun intended) is a bright one and seems to be showing strong, sustainable growth for at least the immediate future.

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