6:27:00 AM
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REDMOND, Wash. — July 19, 2018 — Microsoft
Corp. today announced the following results for the quarter ended June
30, 2018, as compared to the corresponding period of last fiscal year:
The following table reconciles our financial results reported in accordance with generally accepted accounting principles (GAAP) to non-GAAP financial results. Additional information regarding our non-GAAP definition is provided below. All growth comparisons relate to the corresponding period in the last fiscal year.
GAAP results include a net benefit of $104 million related to the Tax
Cuts and Jobs Act (TCJA) for the three months ended June 30, 2018 and a
charge of $306 million related to restructuring expenses for the three
months ended June 30, 2017, which are excluded from our non-GAAP
results.
Microsoft returned $5.3 billion to shareholders in the form of dividends and share repurchases in the fourth quarter of fiscal year 2018, an increase of 16% compared to the fourth quarter of fiscal year 2017.
“Exceptional sales execution delivered double-digit revenue growth across all segments and strong progress against our strategic priorities, anchored by commercial cloud revenue growing 53% year-over-year to $6.9 billion,” said Amy Hood, executive vice president and chief financial officer of Microsoft.
Revenue in Productivity and Business Processes was $9.7 billion and increased 13% (up 10% in constant currency), with the following business highlights:
Microsoft Corp. today announced the following results for the fiscal year ended June 30, 2018, as compared to the corresponding period of last fiscal year:
GAAP results include a net charge of $13.7 billion related to TCJA
for the twelve months ended June 30, 2018 and a charge of $306 million
related to restructuring expenses for the twelve months ended June 30,
2017, which are excluded from our non-GAAP results.
Business Outlook
Microsoft will provide forward-looking guidance in connection with this quarterly earnings announcement on its earnings conference call and webcast.
Webcast Details
Satya Nadella, chief executive officer, Amy Hood, executive vice president and chief financial officer, Frank Brod, chief accounting officer, Carolyn Frantz, deputy general counsel and corporate secretary, and Michael Spencer, general manager of investor relations, will host a conference call and webcast at 2:30 p.m. Pacific time (5:30 p.m. Eastern time) today to discuss details of the company’s performance for the quarter and certain forward-looking information. The session may be accessed at http://www.microsoft.com/en-us/investor. The webcast will be available for replay through the close of business on July 19, 2019.
New Accounting Standards
We adopted new accounting standards related to revenue recognition and leases effective July 1, 2017. The prior periods presented here have been restated to reflect adoption of these new standards.
Non-GAAP Definition
Restructuring Expenses. We recorded $306 million of restructuring charges primarily related to our sales and marketing restructuring plan during the three months ended June 30, 2017.
TCJA Impact. We recorded a benefit of $104 million during the three months ended June 30, 2018 and a net charge of $13.7 billion during the twelve months ended June 30, 2018 related to TCJA. As of June 30, 2018, we have not completed our accounting for the tax effects of TCJA. Our net charge is provisional based on reasonable estimates for those tax effects. Changes to these estimates or new guidance issued by regulators may materially impact our provision for income taxes and effective tax rate in the period in which the adjustments are made. Our accounting for the tax effects of TCJA will be completed during the measurement period, which should not extend beyond the second fiscal quarter of 2019.
We have provided non-GAAP financial measures related to restructuring expenses and TCJA to aid investors in better understanding our performance. We believe these non-GAAP measures aid investors by providing additional insight into our operational performance and help clarify trends affecting our business. For comparability of reporting, management considers non-GAAP measures in conjunction with GAAP financial results in evaluating business performance. The non-GAAP financial measures presented in this release should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP.
Constant Currency
Microsoft presents constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars using the average exchange rates from the comparative period rather than the actual exchange rates in effect during the respective periods. All growth comparisons relate to the corresponding period in the last fiscal year. Microsoft has provided this non-GAAP financial information to aid investors in better understanding our performance. The non-GAAP financial measures presented in this release should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP.
Financial Performance Constant Currency Reconciliation
Segment Revenue Constant Currency Reconciliation
Selected Product and Service Revenue Constant Currency Reconciliation
About Microsoft
Microsoft (Nasdaq “MSFT” @microsoft) enables digital transformation for the era of an intelligent cloud and an intelligent edge. Its mission is to empower every person and every organization on the planet to achieve more.
Forward-Looking Statements
Statements in this release that are “forward-looking statements” are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors such as:
All information in this release is as of June 30, 2018. The company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company’s expectations.
For more information, press only:
Microsoft Media Relations, WE Communications for Microsoft, (425) 638-7777, rrt@we-worldwide.com
For more information, financial analysts and investors only:
Michael Spencer, general manager, Investor Relations, (425) 706-4400
Note to editors: For more information, news and perspectives from Microsoft, please visit the Microsoft News Center at http://www.microsoft.com/news. Web links, telephone numbers, and titles were correct at time of publication, but may since have changed. Shareholder and financial information, as well as today’s 2:30 p.m. Pacific time conference call with investors and analysts, is available at http://www.microsoft.com/en-us/investor.
- Revenue was $30.1 billion and increased 17%
- Operating income was $10.4 billion and increased 35%
- Net income was $8.9 billion GAAP and $8.8 billion non-GAAP
- Diluted earnings per share was $1.14 GAAP and $1.13 non-GAAP
The following table reconciles our financial results reported in accordance with generally accepted accounting principles (GAAP) to non-GAAP financial results. Additional information regarding our non-GAAP definition is provided below. All growth comparisons relate to the corresponding period in the last fiscal year.
| Three Months Ended June 30, | ||||
| ($ in millions, except per share amounts) | Revenue | Operating Income | Net Income | Diluted Earnings per Share |
| 2017 As Reported (GAAP) | $25,605 | $7,682 | $8,069 | $1.03 |
| Restructuring Expenses | – | 306 | 243 | 0.03 |
| 2017 As Adjusted (non-GAAP) | $25,605 | $7,988 | $8,312 | $1.06 |
| 2018 As Reported (GAAP) | $30,085 | $10,379 | $8,873 | $1.14 |
| Net TCJA Impact | – | – | (104) | (0.01) |
| 2018 As Adjusted (non-GAAP) | $30,085 | $10,379 | $8,769 | $1.13 |
| Percentage Change Y/Y (GAAP) | 17% | 35% | 10% | 11% |
| Percentage Change Y/Y (non-GAAP) | 17% | 30% | 5% | 7% |
| Percentage Change Y/Y (non-GAAP) Constant Currency | 15% | 24% | 2% | 3% |
Microsoft returned $5.3 billion to shareholders in the form of dividends and share repurchases in the fourth quarter of fiscal year 2018, an increase of 16% compared to the fourth quarter of fiscal year 2017.
“Exceptional sales execution delivered double-digit revenue growth across all segments and strong progress against our strategic priorities, anchored by commercial cloud revenue growing 53% year-over-year to $6.9 billion,” said Amy Hood, executive vice president and chief financial officer of Microsoft.
Revenue in Productivity and Business Processes was $9.7 billion and increased 13% (up 10% in constant currency), with the following business highlights:
- Office commercial products and cloud services revenue increased 10% (up 8% in constant currency) driven by Office 365 commercial revenue growth of 38% (up 35% in constant currency)
- Office consumer products and cloud services revenue increased 8% (up 6% in constant currency) and Office 365 consumer subscribers increased to 31.4 million
- LinkedIn revenue increased 37% (up 34% in constant currency) with continued acceleration in engagement highlighted by LinkedIn sessions growth of 41%
- Dynamics products and cloud services revenue increased 11% (up 8% in constant currency) driven by Dynamics 365 revenue growth of 61% (up 56% in constant currency)
- Server products and cloud services revenue increased 26% (up 24% in constant currency) driven by Azure revenue growth of 89% (up 85% in constant currency)
- Enterprise Services revenue increased 8% (up 7% in constant currency)
- Windows OEM revenue increased 7% (up 7% in constant currency) driven by OEM Pro revenue growth of 14%
- Windows commercial products and cloud services revenue increased 23% (up 19% in constant currency) driven by an increased volume of multi-year agreements and the mix of products that carry higher in-quarter revenue recognition
- Gaming revenue increased 39% (up 38% in constant currency) with Xbox software and services revenue growth of 36% (up 35% in constant currency) mainly from third party title strength
- Surface revenue increased 25% (up 21% in constant currency) driven by strong performance of the latest editions of Surface against a low prior year comparable
- Search advertising revenue excluding traffic acquisition costs increased 17% (up 16% in constant currency) driven by higher revenue per search and search volume
Microsoft Corp. today announced the following results for the fiscal year ended June 30, 2018, as compared to the corresponding period of last fiscal year:
- Revenue was $110.4 billion and increased 14%
- Operating income was $35.1 billion and increased 21%
- Net income was $16.6 billion GAAP and $30.3 billion non-GAAP
- Diluted earnings per share was $2.13 GAAP and $3.88 non-GAAP
- GAAP results include a $13.7 billion net charge related to TCJA
| Twelve Months Ended June 30, | ||||||
| ($ in millions, except per share amounts) | Revenue | Operating Income | Net Income | Diluted Earnings per Share | ||
| 2017 As Reported (GAAP) | $96,571 | $29,025 | $25,489 | $3.25 | ||
| Restructuring Expenses | – | 306 | 243 | 0.04 | ||
| 2017 As Adjusted (non-GAAP) | $96,571 | $29,331 | $25,732 | $3.29 | ||
| 2018 As Reported (GAAP) | $110,360 | $35,058 | $16,571 | $2.13 | ||
| Net TCJA Impact | – | – | 13,696 | 1.75 | ||
| 2018 As Adjusted (non-GAAP) | $110,360 | $35,058 | $30,267 | $3.88 | ||
| Percentage Change Y/Y (GAAP) | 14% | 21% | (35)% | (34)% | ||
| Percentage Change Y/Y (non-GAAP) | 14% | 20% | 18% | 18% | ||
| Percentage Change Y/Y (non-GAAP) Constant Currency | 13% | 17% | 15% | 16% | ||
Business Outlook
Microsoft will provide forward-looking guidance in connection with this quarterly earnings announcement on its earnings conference call and webcast.
Webcast Details
Satya Nadella, chief executive officer, Amy Hood, executive vice president and chief financial officer, Frank Brod, chief accounting officer, Carolyn Frantz, deputy general counsel and corporate secretary, and Michael Spencer, general manager of investor relations, will host a conference call and webcast at 2:30 p.m. Pacific time (5:30 p.m. Eastern time) today to discuss details of the company’s performance for the quarter and certain forward-looking information. The session may be accessed at http://www.microsoft.com/en-us/investor. The webcast will be available for replay through the close of business on July 19, 2019.
New Accounting Standards
We adopted new accounting standards related to revenue recognition and leases effective July 1, 2017. The prior periods presented here have been restated to reflect adoption of these new standards.
Non-GAAP Definition
Restructuring Expenses. We recorded $306 million of restructuring charges primarily related to our sales and marketing restructuring plan during the three months ended June 30, 2017.
TCJA Impact. We recorded a benefit of $104 million during the three months ended June 30, 2018 and a net charge of $13.7 billion during the twelve months ended June 30, 2018 related to TCJA. As of June 30, 2018, we have not completed our accounting for the tax effects of TCJA. Our net charge is provisional based on reasonable estimates for those tax effects. Changes to these estimates or new guidance issued by regulators may materially impact our provision for income taxes and effective tax rate in the period in which the adjustments are made. Our accounting for the tax effects of TCJA will be completed during the measurement period, which should not extend beyond the second fiscal quarter of 2019.
We have provided non-GAAP financial measures related to restructuring expenses and TCJA to aid investors in better understanding our performance. We believe these non-GAAP measures aid investors by providing additional insight into our operational performance and help clarify trends affecting our business. For comparability of reporting, management considers non-GAAP measures in conjunction with GAAP financial results in evaluating business performance. The non-GAAP financial measures presented in this release should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP.
Constant Currency
Microsoft presents constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars using the average exchange rates from the comparative period rather than the actual exchange rates in effect during the respective periods. All growth comparisons relate to the corresponding period in the last fiscal year. Microsoft has provided this non-GAAP financial information to aid investors in better understanding our performance. The non-GAAP financial measures presented in this release should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP.
Financial Performance Constant Currency Reconciliation
| Three Months Ended June 30, | ||||
| ($ in millions, except per share amounts) | Revenue | Operating Income | Net Income | Diluted Earnings per Share |
| 2017 As Reported (GAAP) | $25,605 | $7,682 | $8,069 | $1.03 |
| 2017 As Adjusted (non-GAAP) | $25,605 | $7,988 | $8,312 | $1.06 |
| 2018 As Reported (GAAP) | $30,085 | $10,379 | $8,873 | $1.14 |
| 2018 As Adjusted (non-GAAP) | $30,085 | $10,379 | $8,769 | $1.13 |
| Percentage Change Y/Y (GAAP) | 17% | 35% | 10% | 11% |
| Percentage Change Y/Y (non-GAAP) | 17% | 30% | 5% | 7% |
| Constant Currency Impact | $549 | $450 | $279 | $0.04 |
| Percentage Change Y/Y (non-GAAP) Constant Currency | 15% | 24% | 2% | 3% |
| Twelve Months Ended June 30, | ||||
| ($ in millions, except per share amounts) | Revenue | Operating Income | Net Income | Diluted Earnings per Share |
| 2017 As Reported (GAAP) | $96,571 | $29,025 | $25,489 | $3.25 |
| 2017 As Adjusted (non-GAAP) | $96,571 | $29,331 | $25,732 | $3.29 |
| 2018 As Reported (GAAP) | $110,360 | $35,058 | $16,571 | $2.13 |
| 2018 As Adjusted (non-GAAP) | $110,360 | $35,058 | $30,267 | $3.88 |
| Percentage Change Y/Y (GAAP) | 14% | 21% | (35)% | (34)% |
| Percentage Change Y/Y (non-GAAP) | 14% | 20% | 18% | 18% |
| Constant Currency Impact | 1,275 | 654 | 569 | $0.07 |
| Percentage Change Y/Y (non-GAAP) Constant Currency | 13% | 17% | 15% | 16% |
| Three Months Ended June 30, | |||
| ($ in millions) | Productivity and Business Processes | Intelligent Cloud | More Personal Computing |
| 2017 As Reported | $8,548 | $7,822 | $9,235 |
| 2018 As Reported | $9,668 | $9,606 | $10,811 |
| Percentage Change Y/Y | 13% | 23% | 17% |
| Constant Currency Impact | $228 | $182 | $139 |
| Percentage Change Y/Y Constant Currency | 10% | 20% | 16% |
| Three Months Ended June 30, 2018 | |||
| Percentage Change Y/Y (GAAP) | Constant Currency Impact | Percentage Change Y/Y Constant Currency | |
| Office commercial products and cloud services | 10% | (2)% | 8% |
| Office 365 commercial | 38% | (3)% | 35% |
| Office consumer products and cloud services | 8% | (2)% | 6% |
| 37% | (3)% | 34% | |
| Dynamics products and cloud services | 11% | (3)% | 8% |
| Dynamics 365 | 61% | (5)% | 56% |
| Server products and cloud services | 26% | (2)% | 24% |
| Azure | 89% | (4)% | 85% |
| Enterprise Services | 8% | (1)% | 7% |
| Windows OEM | 7% | 0% | 7% |
| Windows commercial products and cloud services | 23% | (4)% | 19% |
| Search advertising excluding traffic acquisition costs | 17% | (1)% | 16% |
| Surface | 25% | (4)% | 21% |
| Gaming | 39% | (1)% | 38% |
| Xbox software and services | 36% | (1)% | 35% |
Microsoft (Nasdaq “MSFT” @microsoft) enables digital transformation for the era of an intelligent cloud and an intelligent edge. Its mission is to empower every person and every organization on the planet to achieve more.
Forward-Looking Statements
Statements in this release that are “forward-looking statements” are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors such as:
- 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 new 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;
- a change in our ability to earn expected revenues from our intellectual property rights;
- claims that Microsoft has infringed the intellectual property rights of others;
- the possibility that we may fail to protect our source code;
- 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;
- excessive outages, data losses, and disruptions of our online services if we fail to maintain an adequate operations infrastructure;
- government litigation and regulatory activity relating to competition rules that may limit how we design and market our products;
- potential liability under trade protection, 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;
- the dependence of our business on our ability to attract and retain talented employees;
- claims against us that may result in adverse outcomes in legal disputes;
- additional tax liabilities;
- quality or supply problems;
- exposure to increased economic and operational uncertainties from operating a global business, including the effects of foreign currency exchange;
- catastrophic events or geo-political conditions that may disrupt our business;
- adverse economic or market conditions that may harm our business;
- changes in our sales organization that may impact revenues;
- 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; and
- damage to our reputation or our brands that may harm our business and operating results.
All information in this release is as of June 30, 2018. The company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company’s expectations.
For more information, press only:
Microsoft Media Relations, WE Communications for Microsoft, (425) 638-7777, rrt@we-worldwide.com
For more information, financial analysts and investors only:
Michael Spencer, general manager, Investor Relations, (425) 706-4400
Note to editors: For more information, news and perspectives from Microsoft, please visit the Microsoft News Center at http://www.microsoft.com/news. Web links, telephone numbers, and titles were correct at time of publication, but may since have changed. Shareholder and financial information, as well as today’s 2:30 p.m. Pacific time conference call with investors and analysts, is available at http://www.microsoft.com/en-us/investor.
