FY23 Q3 – Press Releases – Investor Relations – Microsoft

Microsoft Cloud Strength Drives Third Quarter Results
REDMOND, Wash. — April 25, 2023 — Microsoft Corp. today announced the following results for the quarter ended March 31, 2023, as compared to the corresponding period of last fiscal year:
·         Revenue was $52.9 billion and increased 7% (up 10% in constant currency)
·         Operating income was $22.4 billion and increased 10% (up 15% in constant currency)
·         Net income was $18.3 billion and increased 9% (up 14% in constant currency)
·         Diluted earnings per share was $2.45 and increased 10% (up 14% in constant currency)
“The world’s most advanced AI models are coming together with the world’s most universal user interface – natural language – to create a new era of computing,” said Satya Nadella, chairman and chief executive officer of Microsoft. “Across the Microsoft Cloud, we are the platform of choice to help customers get the most value out of their digital spend and innovate for this next generation of AI.”


“Focused execution by our sales teams and partners in this dynamic environment resulted in Microsoft Cloud revenue of $28.5 billion, up 22% (up 25% in constant currency) year-over-year,” said Amy Hood, executive vice president and chief financial officer of Microsoft.
Business Highlights
Revenue in Productivity and Business Processes was $17.5 billion and increased 11% (up 15% in constant currency), with the following business highlights:
·         Office Commercial products and cloud services revenue increased 13% (up 17% in constant currency) driven by Office 365 Commercial revenue growth of 14% (up 18% in constant currency)
·         Office Consumer products and cloud services revenue increased 1% (up 4% in constant currency) and Microsoft 365 Consumer subscribers grew to 65.4 million
·         LinkedIn revenue increased 8% (up 10% in constant currency)
·         Dynamics products and cloud services revenue increased 17% (up 21% in constant currency) driven by Dynamics 365 revenue growth of 25% (up 29% in constant currency)
Revenue in Intelligent Cloud was $22.1 billion and increased 16% (up 19% in constant currency), with the following business highlights:
·         Server products and cloud services revenue increased 17% (up 21% in constant currency) driven by Azure and other cloud services revenue growth of 27% (up 31% in constant currency)
Revenue in More Personal Computing was $13.3 billion and decreased 9% (down 7% in constant currency), with the following business highlights:
·         Windows OEM revenue decreased 28%
·         Devices revenue decreased 30% (down 26% in constant currency)
·         Windows Commercial products and cloud services revenue increased 14% (up 18% in constant currency)
·         Xbox content and services revenue increased 3% (up 5% in constant currency)
·         Search and news advertising revenue excluding traffic acquisition costs increased 10% (up 13% in constant currency)
Microsoft returned $9.7 billion to shareholders in the form of share repurchases and dividends in the third quarter of fiscal year 2023.
Business Outlook
Microsoft will provide forward-looking guidance in connection with this quarterly earnings announcement on its earnings conference call and webcast.
Quarterly Highlights, Product Releases, and Enhancements 
Every quarter Microsoft delivers hundreds of products, either as new releases, services, or enhancements to current products and services. These releases are a result of significant research and development investments, made over multiple years, designed to help customers be more productive and secure and to deliver differentiated value across the cloud and the edge.
Here are the major product releases and other highlights for the quarter, organized by product categories, to help illustrate how we are accelerating innovation across our businesses while expanding our market opportunities.
Environmental, Social, and Governance (ESG)
To better execute on Microsoft’s mission, we focus our Environmental, Social, and Governance (ESG) efforts where we can have the most positive impact. To learn more about our latest initiatives and priorities, please visit our investor relations ESG website. 
Webcast Details
Satya Nadella, chairman and chief executive officer, Amy Hood, executive vice president and chief financial officer, Alice Jolla, chief accounting officer, Keith Dolliver, deputy general counsel, and Brett Iversen, vice president 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 April 25, 2024.
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 March 31,
 ($ in millions, except per share amounts)
Revenue
Operating Income
Net Income
Diluted Earnings per Share
2022 As Reported (GAAP)
$49,360
$20,364
$16,728
$2.22
2023 As Reported (GAAP)
$52,857
$22,352
$18,299
$2.45
Percentage Change Y/Y (GAAP)
7%
10%
9%
10%
Constant Currency Impact
$(1,482)
$(1,069)
$(704)
$(0.09)
Percentage Change Y/Y Constant Currency
10%
15%
14%
14%
Segment Revenue Constant Currency Reconciliation
 
Three Months Ended March 31,
 ($ in millions)
Productivity and Business Processes
Intelligent Cloud
More Personal Computing
2022 As Reported (GAAP)
$15,789
$18,987
$14,584
2023 As Reported (GAAP)
$17,516
$22,081
$13,260
Percentage Change Y/Y (GAAP)
11%
16%
(9)%
Constant Currency Impact
$(587)
$(591)
$(304)
Percentage Change Y/Y Constant Currency
15%
19%
(7)%
We have recast certain prior period amounts to conform to the way we internally manage and monitor our business.
 
Selected Product and Service Revenue Constant Currency Reconciliation       
 
Three Months Ended March 31, 2023
Percentage Change Y/Y (GAAP)
Constant Currency Impact
Percentage Change Y/Y Constant Currency
Microsoft Cloud revenue
22%
3%
25%
Office Commercial products and cloud services
13%
4%
17%
Office 365 Commercial
14%
4%
18%
Office Consumer products and cloud services
1%
3%
4%
LinkedIn
8%
2%
10%
Dynamics products and cloud services
17%
4%
21%
Dynamics 365
25%
4%
29%
Server products and cloud services
17%
4%
21%
Azure and other cloud services
27%
4%
31%
Windows OEM
(28)%
0%
(28)%
Windows Commercial products and cloud services
14%
4%
18%
Xbox content and services
3%
2%
5%
Search and news advertising excluding traffic acquisition costs
10%
3%
13%
Devices
(30)%
4%
(26)%
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:
·         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, professional, marketplace, or gaming 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.
For more information about risks and uncertainties associated with Microsoft’s business, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of Microsoft’s SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting Microsoft’s Investor Relations department at (800) 285-7772 or at Microsoft’s Investor Relations website at http://www.microsoft.com/en-us/investor.
All information in this release is as of March 31, 2023. 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:
Brett Iversen, Vice President, 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.
 
MICROSOFT CORPORATION
INCOME STATEMENTS
(In millions, except per share amounts) (Unaudited)
Three Months Ended
March 31,
Nine Months Ended
March 31,
 
2023
 
2022
 
2023
 
2022
Revenue:
Product
 $15,588
 $17,366
 $47,846
 $54,776
Service and other
37,269
 
31,994
 
107,880
 
91,629
Total revenue
52,857
 
49,360
 
155,726
 
146,405
Cost of revenue:
Product
3,941
4,584
13,933
14,707
Service and other
12,187
 
11,031
 
35,135
 
31,514
Total cost of revenue
16,128
 
15,615
 
49,068
 
46,221
Gross margin
36,729
33,745
106,658
100,184
Research and development
6,984
6,306
20,456
17,663
Sales and marketing
5,750
5,595
16,555
15,521
General and administrative
1,643
1,480
5,378
4,151
Operating income
22,352
 
20,364
 
64,269
 
62,849
Other income (expense), net
321
 
(174)
 
315
 
380
Income before income taxes
22,673
20,190
64,584
63,229
Provision for income taxes
4,374
 
3,462
 
12,304
 
7,231
Net income
 $18,299
 
 $16,728
 
 $52,280
 
 $55,998
Earnings per share:
Basic
 $2.46
 $2.23
 $7.02
 $7.46
Diluted
 $2.45
 $2.22
 $6.99
 $7.41
Weighted average shares outstanding:
Basic
7,441
7,493
7,450
7,504
Diluted
7,464
 
7,534
 
7,474
 
7,552
 
 
COMPREHENSIVE INCOME STATEMENTS
(In millions) (Unaudited)
Three Months Ended
March 31,
Nine Months Ended
March 31,
 
2023
 
2022
 
2023
 
2022
Net income
 $18,299
 
 $16,728
 
 $52,280
 
 $55,998
Other comprehensive income (loss), net of tax:
Net change related to derivatives
(9)
6
(34)
8
Net change related to investments
753
(2,882)
(796)
(4,047)
Translation adjustments and other
69
 
(37)
 
(136)
 
(259)
Other comprehensive income (loss)
813
 
(2,913)
 
(966)
 
(4,298)
Comprehensive income
 $19,112
 
 $13,815
 
 $51,314
 
 $51,700
 
 
BALANCE SHEETS
(In millions) (Unaudited)
 
March 31,
2023
 
June 30,
 2022
Assets
Current assets:
Cash and cash equivalents
 $26,562
 $13,931
Short-term investments
77,865
 
90,826
Total cash, cash equivalents, and short-term investments
104,427
104,757
Accounts receivable, net of allowance for doubtful accounts of $495 and $633
37,420
44,261
Inventories
2,877
3,742
Other current assets
19,165
 
16,924
Total current assets
163,889
169,684
Property and equipment, net of accumulated depreciation of $65,998 and $59,660
88,132
74,398
Operating lease right-of-use assets
13,879
13,148
Equity investments
9,415
6,891
Goodwill
67,940
67,524
Intangible assets, net
9,879
11,298
Other long-term assets
26,954
 
21,897
Total assets
 $380,088
 
 $364,840
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
 $15,305
 $19,000
Current portion of long-term debt
6,245
2,749
Accrued compensation
10,411
10,661
Short-term income taxes
4,163
4,067
Short-term unearned revenue
36,903
45,538
Other current liabilities
12,664
 
13,067
Total current liabilities
85,691
95,082
Long-term debt
41,965
47,032
Long-term income taxes
25,000
26,069
Long-term unearned revenue
2,698
2,870
Deferred income taxes
302
230
Operating lease liabilities
12,312
11,489
Other long-term liabilities
17,437
 
15,526
Total liabilities
185,405
 
198,298
Commitments and contingencies
Stockholders’ equity:
Common stock and paid-in capital – shares authorized 24,000; outstanding 7,437 and 7,464
92,093
86,939
Retained earnings
108,234
84,281
Accumulated other comprehensive loss
(5,644)
(4,678)
Total stockholders’ equity
194,683
 
166,542
Total liabilities and stockholders’ equity
 $380,088
 
 $364,840
 
CASH FLOWS STATEMENTS
(In millions) (Unaudited)
Three Months Ended
March 31,
Nine Months Ended
March 31,
 
2023
 
2022
 
2023
 
2022
Operations
Net income
 $18,299
 $16,728
 $52,280
 $55,998
Adjustments to reconcile net income to net cash from operations:
Depreciation, amortization, and other
3,549
3,773
9,987
10,481
Stock-based compensation expense
2,465
1,906
7,195
5,505
Net recognized losses (gains) on investments and derivatives
(40)
105
152
(566)
Deferred income taxes
(1,675)
(198)
(4,171)
(5,985)
Changes in operating assets and liabilities:
Accounts receivable
(1,408)
857
7,157
5,800
Inventories
106
(279)
868
(662)
Other current assets
1,152
91
428
1,861
Other long-term assets
(554)
(724)
(1,285)
(2,230)
Accounts payable
(407)
520
(4,032)
284
Unearned revenue
(181)
(209)
(8,689)
(7,437)
Income taxes
1,414
1,091
(1,039)
1,687
Other current liabilities
1,715
1,287
(490)
(1,111)
Other long-term liabilities
6
 
438
 
451
 
781
Net cash from operations
24,441
 
25,386
 
58,812
 
64,406
Financing
Repayments of debt
0
(4,197)
(1,750)
(9,023)
Common stock issued
536
477
1,354
1,380
Common stock repurchased
(5,509)
(8,822)
(16,541)
(23,939)
Common stock cash dividends paid
(5,059)
(4,645)
(14,746)
(13,503)
Other, net
(258)
 
(158)
 
(839)
 
(522)
Net cash used in financing
(10,290)
 
(17,345)
 
(32,522)
 
(45,607)
Investing
Additions to property and equipment
(6,607)
(5,340)
(19,164)
(17,015)
Acquisition of companies, net of cash acquired, and purchases of intangible and other assets
(301)
(18,719)
(1,329)
(20,775)
Purchases of investments
(9,063)
(8,723)
(25,675)
(21,537)
Maturities of investments
13,154
1,099
26,744
15,214
Sales of investments
1,239
16,693
8,725
25,218
Other, net
(1,686)
(1,181)
(2,847)
(1,687)
Net cash used in investing
(3,264)
 
(16,171)
 
(13,546)
 
(20,582)
Effect of foreign exchange rates on cash and cash equivalents
29
 
24
 
(113)
 
57
Net change in cash and cash equivalents
10,916
(8,106)
12,631
(1,726)
Cash and cash equivalents, beginning of period
15,646
 
20,604
 
13,931
 
14,224
Cash and cash equivalents, end of period
 $26,562
 
 $12,498
 
 $26,562
 
 $12,498
 
SEGMENT REVENUE AND OPERATING INCOME
(In millions) (Unaudited)
 
Three Months Ended
March 31,
 
Nine Months Ended
March 31,
 
 
 
2023
 
2022
 
2023
 
2022
Revenue
 
 
 
 
 
 
 
Productivity and Business Processes
$17,516
 
$15,789
 
 $50,983
 
 $46,764
Intelligent Cloud
22,081
 
18,987
 
63,914
 
54,161
More Personal Computing
13,260
 
14,584
 
40,829
 
45,480
Total
$52,857
 
$49,360
 
$155,726
 
$146,405
Operating Income
 
 
 
 
 
 
 
Productivity and Business Processes
$8,639
 
$7,185
 
$25,137
 
$22,454
Intelligent Cloud
9,476
 
8,391
 
27,358
 
24,395
More Personal Computing
4,237
 
4,788
 
11,774
 
16,000
Total
$22,352
 
$20,364
 
$64,269
 
$62,849
 
We have recast certain prior period amounts to conform to the way we internally manage and monitor our business.
Information contained in these documents is current as of the earnings date, and not restated for new accounting standards

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