- Microsoft reported fourth quarter and full fiscal year earnings at the close of the market on Wednesday, beating Wall Street estimates in the bottom line.
- Microsoft continued to experience strong growth in companies like Office 365, Microsoft Azure, Windows, and Xbox, as housewife orders across the country lead to increased demand for remote work tools and video games.
- For the first time, Microsoft recorded $ 50 billion in annual recurring revenue for its commercial cloud business, which includes Microsoft Office and Azure sales to businesses.
- However, its Office and Windows businesses were affected by a slowdown in transactional licenses for small and medium-sized businesses, Microsoft said.
- Shares are trading down more than 2% at the time of publication.
- Visit the Business Insider home page for more stories.
Microsoft reported earnings for its fourth fiscal quarter and total earnings for fiscal 2020 at the close of the market on Wednesday, beating analysts’ expectations for the overall results, but estimates on a key business unit, including its Office products, are lacking.
This is what the company reported for the fourth quarter of 2020:
- Income: $ 38 billion (Wall Street expected $ 36.5 billion), compared to $ 33.7 billion in the same quarter last year.
- Profits: $ 1.46 per share, compared to analyst estimates of $ 1.37 per share.
- Profit: $ 11.2 billion, 15% less
This is what the company reported for its fiscal year 2020:
- Income: $ 143 billion, up 14%
- Profits: $ 5.76 per share, up 14%
- Profit: $ 44.3 billion, an increase of 13%
Shares fell more than 2% in off-hours trading to less than $ 206 a share after launch.
While the company surpassed many of its top metrics for the fourth quarter, it significantly exceeded expectations in the key business unit that includes the Office 365 cloud productivity package and its Microsoft Teams communications application.
Called “Productivity and Business Processes,” the unit, which includes Office products for businesses and customers, LinkedIn revenue, and Dynamics products and cloud services, reached $ 11.75 billion in the fourth quarter, missing estimates of $ 11.9 billion.
For the second consecutive quarter, Microsoft said it experienced a slowdown in transactional licensing, especially for small and medium-sized businesses. Microsoft said the slowdown contributed to a 34 percent decrease in revenue for Office products used by businesses, “reflecting the continued shift from customers to cloud offerings from multi-year local deals.” Transactional licenses refer to the traditional single purchase model of purchasing software.
Microsoft’s “Smart Cloud” business, which includes Azure, server products, business and cloud services, generated $ 13.37 billion in fourth-quarter revenue, slightly exceeding analyst expectations. Microsoft does not report revenue figures for its Azure cloud computing business, but said revenue grew 47% over the same period in 2019, a notable drop from the 59% growth rate it posted in the previous quarter, and 62% in the previous quarter.
Revenue from the business unit that Microsoft calls the “Most Personal Computing” unit, which includes Windows, Search, Xbox and Surface, was $ 12.9 billion in the fourth quarter, up 14% from last year.
Meanwhile, Microsoft said its commercial cloud business, which includes Microsoft Azure, Office 365 and other cloud services, surpassed an annualized execution rate of $ 50 billion for the first time this year.
While the pandemic has created challenges for many companies, including smaller partners Microsoft relies on to sell its software and services, the move to remote work has been seen as a boost for the company overall as users turn to products like the Microsoft Teams chat application and the Microsoft Azure cloud.
Last week, Microsoft cut a small number of jobs as it moved into the new fiscal year. A person familiar with the situation told Business Insider that the cuts affected fewer than 1,000 jobs. LinkedIn, Microsoft’s professional social media affiliate, on Tuesday announced plans to cut 960 additional jobs.
Microsoft also made significant changes last month by announcing plans to shutdown its video game streaming service and would shutdown most of its retail stores. Those moves, analysts say, signal CEO Satya Nadella’s strategy of ruthlessly prioritizing Microsoft’s strengths and reducing its losses in other areas.
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