Microsoft FY19 Q2 earnings

Microsoft today announced its earnings for FY19 Q2, showing revenues of $32.5 billion and $8.4 billion in net income. That's an increase from the same period a year ago, in which Microsoft took in $28.9 billion in revenue and a loss of $6.3 billion in net income.

Here are the highlights from this quarter's release:

  • Revenue was $32.5 billion and increased 12%
  • Operating income was $10.3 billion and increased 18%
  • Net income was $8.4 billion GAAP and $8.6 billion non-GAAP
  • Diluted earnings per share was $1.08 GAAP and $1.10 non-GAAP

"Our solid execution delivered another strong quarter, with commercial cloud revenue growing 48% year-over-year to $9.0 billion," said Amy Hood, executive vice president and chief financial officer of Microsoft. "We continue to make strategic investments to capture expanding market opportunities to drive growth across our businesses."

Windows, Surface, and gaming

In Microsoft's "More Personal Computing" category, which includes Windows, Surface, gaming, and search advertising revenue, the company saw revenues move up by seven percent to $13 billion. The biggest highlight from this area was Microsoft's Surface hardware business, which saw revenue increase by 39 percent. Gaming revenue was up by eight percent, while search advertising and Windows commercial products and cloude services saw boosts of 14 percent and 13 percent, respectively.

The only area that was down was Windows OEM revenue, which declined by five percent.

Cloud and Office

Both Office and Microsoft's cloud businesses are still big earners for the company. Revenues in the "Intelligent Cloud" side of things was up by 20 percent, at $9.4 billion. Meanwhile, revenues across "Productivity and Business Processes" was up by 13 percent to $10.1 billion.

Here are the highlights:

  • Office Commercial products and cloud services revenue increased 11% (up 11% in constant currency) driven by Office 365 Commercial revenue growth of 34% (up 33% in constant currency)
  • Office Consumer products and cloud services revenue increased 1% (up 2% in constant currency) with growth in Office 365 Consumer subscribers to 33.3 million
  • LinkedIn revenue increased 29% (up 30% in constant currency) with record levels of engagement highlighted by LinkedIn sessions growth of 30%
  • Dynamics products and cloud services revenue increased 17% (up 17% in constant currency) driven by Dynamics 365 revenue growth of 51% (up 50% in constant currency)
  • Server products and cloud services revenue increased 24% (up 24% in constant currency) driven by Azure revenue growth of 76% (up 76% in constant currency)
  • Enterprise Services revenue increased 6% (up 7% in constant currency)

Overall, Microsoft hit the top end of analyst expectations in total revenues. Surface performed as expected as well, seeing large growth on the back of newer devices like hte Surface Pro 6, Surface Laptop 2, and Surface Go. One of the biggest drivers of growth, however, continues to be Azure, which we'll likely continue to see be the case in future quarters.

Update: Microsoft blames chip manufacturers (likely Intel) for a constrained chip market, which prevented more Windows PC sales from taking place. That chip constraint is expected to continue into next quarter (Q3). Additionally, Microsoft is predicting another strong quarter for Surface in Q3.