Microsoft posts strong quarter but blames global conditions for some financial results

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It's that time of the year again, Microsoft has published its latest quarterly earnings. As usual, the company has posted strong figures for the last quarter of fiscal year 2022 as it looks forward to starting fiscal year 2023. It is important to note that its fiscal year 2022 ended on June 30, 2022.

In its latest quarter, Microsoft's revenue was $51.9 billion, which is a 12% increase (16% Constant Currency) compared to the same period in the previous fiscal year. Meanwhile, operating income had a single-digit growth of 8% (14% CC), up to $20.5 billion. Net income increased by 2% (7% CC) to $16.7 billion and diluted earnings per share were $2.23, up by 3% (8% CC).

While all of these are positive figures, Microsoft has highlighted some unfavorable global and macroeconomic conditions that negatively impacted its results. These are unforeseen circumstances that the company did not bring up in its forward-looking statements published in April 2022.

Microsoft has noted that unfavorable foreign exchange rates negatively affected revenue and diluted earnings per share by $595 million and $0.04, respectively. An overall reduction in advertising spending led to negative impacts on LinkedIn, with Search and news advertising revenue decreasing by $100 million too. There were also "extended" production shutdowns in China throughout May, which coupled with deterioration in the PC market in June led to a decline of $300 million in Windows OEM revenue.

Meanwhile, when it comes to the ongoing invasion of Ukraine, Microsoft scaled down its operations in Russia, which meant that the company posted operating expenses of $126 million in lieu of bad debts, asset impairments, and severance packages. Even outside of Russia, the realignment of its business groups across the globe resulted in employee severance payments of $113 million.

But coming back to the business highlights for the latest quarter, Productivity and Business Processes revenue stood at $16.6 billion, up by 13%. This was powered by significant growth in revenue for Office Commercial products (9%), Office 365 Commercial (15%), Office Consumer products (9%), LinkedIn (26%), Dynamics products (19%), and Dynamics 365 (31%). Microsoft 365 subscribers also grew to 59.7 million people.

Similarly, Intelligent Cloud revenue was at $20.9 billion, which is a jump of 20%, This is due to Server products growth (22%) and Azure (40%).

Finally, revenue in the More Personal Computing category is a bit of a mixed bag. While overall revenue grew by 2% and stood at $14.4 billion, Windows OEM revenue declined by 2% and Xbox content and services was down by 6%. Windows Commercial products grew by 6% and Surface revenue was up by 10%.

Overall, for fiscal year 2022, revenue was at $198.3 billion (18% growth compared to previous fiscal year), operating income was $83.4 billion (19%), net income was $72.7 billion GAAP (19%), $69.4 billion non-GAAP (15%), diluted earnings per share was $9.65 GAAP (20%), and $9.21 non-GAAP (16%).

You can find more nitty gritty details about Microsoft's financials and earnings here.

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