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Microsoft Q4 2019 earnings: Intelligent Cloud finally gets more than More Personal Computing

Today, Microsoft published its quarterly earnings report for the fourth quarter of its 2019 fiscal year, or the second quarter of the calendar year. The company earned $33.7 billion in revenue for 12% growth (14% constant currency). Operating income was $12.4 billion for 20% growth (24% CC), and net income was $13.2 billion ($10.6 billion non-GAAP), for 49% growth. Diluted earnings per share was $1.71, for 50% growth.

There's one big difference this time around. Typically, the largest revenue generator is the More Personal Computing segment. Obviously, Microsoft is laser-focused on the cloud, but the company's miscellaneous bucket of Windows, Xbox, Surface, and more always comes out on top. Not this time though.

This time, the Intelligent Cloud segment generated $11.4 billion in revenue, showing 19% growth (21% CC) year-over-year. More Personal Computing brought in $11.3 billion, a 4% increase (6% CC), and Productivity and Business Processes brought in $11 billion for 14% growth (17% CC).

Productivity and Business Processes saw plenty of growth, in fact. Office Commercial products and cloud services grew by 14% (16% CC), driven by 31% growth (34% CC) in Office 365 Commercial seat growth and 23% growth in revenue per user. Regular Office Commercial products continued to decline by 17% (15% CC). Office 365 consumer subscribers grew to 34.8 million, an increase from last quarter's 34.2 million, and Office consumer products and cloud services grew by 6% (8% CC).

LinkedIn revenue grew by 25% (28% CC), and sessions grew by 22%, although Microsoft still won't say how much revenue that actually is. Dynamics products and cloud services grew by 12% (15% CC), with a 45% increase (48% CC) for Dynamics 365.

The Intelligent Cloud is the big winner, being the top revenue generator for Microsoft's three businesses. Server products and cloud services grew by 22% (24% CC), driven by Azure growth of 64% (68% CC). Server products grew by 5% (7% CC), mainly because of the end of life dates for SQL Server 2008 and Windows Server 2008. Enterprise Mobility grew by 41% to 116 million seats.

Over in the More Personal Computing department, Windows OEM Pro revenue grew by 18%, and non-Pro revenue declined by 8%. Microsoft attributed the Pro growth to "healthy Windows 10 demand" and the upcoming end of life for Windows 7. The non-Pro decline was attributed to "continued pressure in the entry level category". Windows Commercial products and cloud services also grew by 13% (16% CC).

Surface revenue grew by an impressive 14% (17% CC), despite the aging range of hardware. Microsoft credited growth in the commercial segment for this.

Gaming revenue actually declined this time around, by 10% (8% CC). Hardware revenue declined by a surprising 48% (47% CC), due to, you guessed it, "a decrease in volume of consoles sold". Xbox software and services also declined, although only by 3% (1% CC), and Xbox Live monthly users grew by 14% to 65 million.

Finally, search advertising revenue is up by 9% (10% CC). Microsoft credits higher revenue per search for this.

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