Microsoft Cloud strength highlights second quarter results


REDMOND, Wash. — January 26, 2017 — Microsoft Corp. today announced the following results for the quarter ended December 31, 2016:

Revenue was $24.1 billion GAAP, and $26.1 billion non-GAAP
Operating income was $6.2 billion GAAP, and $8.2 billion non-GAAP
Net income was $5.2 billion GAAP, and $6.5 billion non-GAAP
Diluted earnings per share was $0.66 GAAP, and $0.83 non-GAAP

Microsoft completed the acquisition of LinkedIn Corporation (“LinkedIn”) on December 8, 2016. Financial results from the acquired business are reported in the Productivity and Business Processes segment. For the second quarter of fiscal year 2017, the results of LinkedIn, including amortization of acquired intangible assets, contributed revenue, operating income, net income, and diluted earnings per share of $228 million, $(201) million, $(100) million, and $(0.01), respectively.

“Our customers are seeing greater value and opportunity as we partner with them through their digital transformation,” said Satya Nadella, chief executive officer at Microsoft. “Accelerating advancements in AI across our platforms and services will provide further opportunity to drive growth in the Microsoft Cloud.”

The following table reconciles our financial results reported in accordance with generally accepted accounting principles (“GAAP”) to non-GAAP financial results. Microsoft has provided this non-GAAP financial information to aid investors in better understanding the company’s performance. Additional information regarding our non-GAAP definition is provided below. All growth comparisons relate to the corresponding period in the last fiscal year.

Three Months Ended December 31,
($ in millions, except per share amounts)
Revenue
Operating Income
Net Income
Diluted Earnings per Share
2015 As Reported (GAAP)
$23,796
$6,026
$5,018
$0.62
Net Impact from Windows 10 Revenue Deferrals
1,710
1,710
1,128
0.14
2015 As Adjusted for Windows 10 Revenue Deferrals (non-GAAP)
$25,506
$7,736
$6,146
$0.76
2016 As Reported (GAAP)
$24,090
$6,177
$5,200
$0.66
Net Impact from Windows 10 Revenue Deferrals
1,976
1,976
1,315
0.17
2016 As Adjusted for Windows 10 Revenue Deferrals (non-GAAP)
$26,066
$8,153
$6,515
$0.83
Percentage Change Y/Y (GAAP)
1%
3%
4%
6%
Percentage Change Y/Y (non-GAAP)
2%
5%
6%
9%
Percentage Change Y/Y (non-GAAP) Constant Currency
4%
8%
10%
13%

Microsoft is providing the following table to help investors compare results for the second quarter of fiscal year 2017 to the guidance previously provided for the quarter, which excluded LinkedIn.

Three Months Ended December 31,
($ in millions, except per share amounts)
Revenue
Operating Income
Net Income
Diluted Earnings per Share
2015 As Adjusted for Windows 10 Revenue Deferrals (non-GAAP) from Table Above
$25,506
$7,736
$6,146
$0.76
2016 As Adjusted for Windows 10 Revenue Deferrals (non-GAAP) from Table Above
$26,066
$8,153
$6,515
$0.83
LinkedIn Results Including Amortization of Acquired Intangible Assets
228
(201)
(100)
(0.01)
2016 As Further Adjusted for Windows 10 Revenue Deferrals, Excluding LinkedIn Results (non-GAAP)
$25,838
$8,354
$6,615
$0.84
Percentage Change Y/Y Excluding LinkedIn Results (non-GAAP)
1%
8%
8%
11%
Percentage Change Y/Y Excluding LinkedIn Results (non-GAAP) Constant Currency
3%
11%
12%
15%

Microsoft returned $6.5 billion to shareholders in the form of share repurchases and dividends in the second quarter of fiscal year 2017.

“I am pleased with our results this quarter. We see strong demand for our cloud-based services and are executing well on our long-term growth strategy,” said Amy Hood, executive vice president and chief financial officer at Microsoft.

Revenue in Productivity and Business Processes was $7.4 billion and increased 10% (up 12% in constant currency), with the following business highlights:

Office commercial products and cloud services revenue increased 5% (up 7% in constant currency) driven by Office 365 commercial revenue growth of 47% (up 49% in constant currency)
Office consumer products and cloud services revenue increased 22% (up 21% in constant currency) …read more