Microsoft's FY21 Q4 earnings: Commercial Cloud is a broken record of success for the company, 36% growth YoY

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At this point, Microsoft's quarterly cloud growth is becoming a broken record of success with the company posting another blowout quarter of revenue earnings and profit.

For its FY21 Q4 earnings report, Microsoft just announced the company produced $46.2 billion in revenue, which adds up to a 21% increase year over year for the three months including April through June. As far as net profit is concerned, Microsoft added $16.6 billion in the bank and investors will see a diluted earnings per share of $2.17 representing a 49% increase from this time last year as the company returns $10.4 billion to shareholders in total.

As the tech industry settles into a slow-paced hardware engineering morass while chipset constraints continue to be a reality, Microsoft's software and cloud-centric portfolio has taken lead once again for the company with its Commercial Cloud forging ahead with 35% growth and $19.5 billion in revenue for the quarter.

Xbox chipset shortage and cloud revenue

However, not everything is roses for Microsoft investors looking beyond the current earnings valley. Microsoft's Gaming, Surface and Windows sectors all saw declines YoY with the Surface division posting the highest decline at 20% for the quarter. Despite the warm gaming community reception, Microsoft's Xbox content and services also saw a 4% decline as well as Windows OEM revenue which brings up the rear of declines with 3% year over year.

Gamepass - slow quarter

For more details and context, below are the investor's notes:

Productivity and Business Processes

Revenue in Productivity and Business Processes was $14.7 billion and increased 25% (up 21% in constant currency), with the following business highlights:

  • Office Commercial products and cloud services revenue increased 20% (up 15% in constant currency) driven by Office 365 Commercial revenue growth of 25% (up 20% in constant currency)
  • Office Consumer products and cloud services revenue increased 18% (up 15% in constant currency) and Microsoft 365 Consumer subscribers increased to 51.9 million
  • LinkedIn revenue increased 46% (up 42% in constant currency) driven by Marketing Solutions growth of 97% (up 91% in constant currency)
  • Dynamics products and cloud services revenue increased 33% (up 26% in constant currency) driven by Dynamics 365 revenue growth of 49% (up 42% in constant currency)

Intelligent Cloud

Revenue in Intelligent Cloud was $17.4 billion and increased 30% (up 26% in constant currency), with the following business highlights:

  • Server products and cloud services revenue increased 34% (up 29% in constant currency) driven by Azure revenue growth of 51% (up 45% in constant currency)

More Personal Computing

Revenue in More Personal Computing was $14.1 billion and increased 9% (up 6% in constant currency), with the following business highlights:

  • Windows OEM revenue decreased 3%
  • Windows Commercial products and cloud services revenue increased 20% (up 14% in constant currency)
  • Xbox content and services revenue decreased 4% (down 7% in constant currency)
  • Search advertising revenue excluding traffic acquisition costs increased 53% (up 49% in constant currency)
  • Surface revenue decreased 20% (down 23% in constant currency)

Microsoft returned $10.4 billion to shareholders in the form of share repurchases and dividends in the fourth quarter of fiscal year 2021, an increase of 16% compared to the fourth quarter of fiscal year 2020.

Despite a phenomenal earnings quarter, Microsoft has it eyes set on shifting global economic headwinds that foresees as potential problems in the coming months.

Microsoft has an investors call scheduled for 5:30 PM ET / 3:30 PT later today, but the company has already included some Forward-Looking Statements on its website that it will address that include but are not limited to:

  • intense competition in all of our markets that may lead to lower revenue or operating margins;
  • increasing focus on cloud-based services presenting execution and competitive risks;
  • significant investments in products and services that may not achieve expected returns;
  • acquisitions, joint ventures, and strategic alliances that may have an adverse effect on our business;
  • impairment of goodwill or amortizable intangible assets causing a significant charge to earnings;
  • cyberattacks and security vulnerabilities that could lead to reduced revenue, increased costs, liability claims, or harm to our reputation or competitive position;
  • disclosure and misuse of personal data that could cause liability and harm to our reputation;
  • the possibility that we may not be able to protect information stored in our products and services from use by others;
  • abuse of our advertising or social platforms that may harm our reputation or user engagement;
  • the development of the internet of things presenting security, privacy, and execution risks;
  • issues about the use of artificial intelligence in our offerings that may result in competitive harm, legal liability, or reputational harm;
  • excessive outages, data losses, and disruptions of our online services if we fail to maintain an adequate operations infrastructure;
  • quality or supply problems;
  • government litigation and regulatory activity relating to competition rules that may limit how we design and market our products;
  • potential consequences under trade, anti-corruption, and other laws resulting from our global operations;
  • laws and regulations relating to the handling of personal data that may impede the adoption of our services or result in increased costs, legal claims, fines, or reputational damage;
  • claims against us that may result in adverse outcomes in legal disputes;
  • uncertainties relating to our business with government customers;
  • additional tax liabilities;
  • the possibility that we may fail to protect our source code;
  • legal changes, our evolving business model, piracy, and other factors may decrease the value of our intellectual property;
  • claims that Microsoft has infringed the intellectual property rights of others;
  • damage to our reputation or our brands that may harm our business and operating results;
  • adverse economic or market conditions that may harm our business;
  • catastrophic events or geo-political conditions, such as the COVID-19 pandemic, that may disrupt our business;
  • exposure to increased economic and operational uncertainties from operating a global business, including the effects of foreign currency exchange and
  • the dependence of our business on our ability to attract and retain talented employees.

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