MICROSOFT CORP (MSFT) SEC Filing 10-Q Quarterly report for the period ending Saturday, December 31, 2016

PDFPDF Microsoft WordWord Microsoft ExcelExcel SubscribeRSS E-mailEmail Smartphone and TabletMobile last10k.com/sec-filings/msft/0001564590-17-000654.htm

Exhibit 99.1

Microsoft Cloud Strength Highlights Second Quarter Results

Commercial cloud annualized revenue run rate exceeds $14.0 billion

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%

 

  

 


The following information was filed by MICROSOFT CORP on Thursday, January 26, 2017 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

Sentiment Analysis off   on

Filter by Sentiment:
Filter by Category:

View our Sentiment Analysis Tour
Filter by Subcategory:
Click a sentiment analysis snippet below from MICROSOFT CORP's Management Discussions to find these positive and negative remarks within their 10-Q Quarterly report:
  • msft_10q_2017-01-26_123_211
    MA - Other
    Cash used in investing increased $24.8 billion to $33.2 billion, mainly due to a $24.0 billion increase in cash used for acquisitions of companies, net of cash acquired, and purchases of intangibles and other assets, a $771 million increase in cash used for additions to property and equipment, and a $682 million increase in cash used for net investment purchases, sales, and maturities, offset in part by a $639 million increase in cash from securities lending activities.
  • msft_10q_2017-01-26_62_77
    Revenue - Product
    Xbox hardware revenue decreased 22%, mainly due to lower prices of consoles sold and a decline in volume of consoles sold.
  • msft_10q_2017-01-26_78_120
    Revenue - Product
    Xbox hardware revenue decreased 23%, mainly due to lower prices of consoles sold and a decline in volume of consoles sold.
  • msft_10q_2017-01-26_2_5
    Other - Other
    We describe risks and uncertainties that could cause actual results and events to differ materially in Risk Factors Part II, Item 1A of this Form 10-Q, Quantitative and Qualitative Disclosures about Market Risk Part I, Item 3 of this Form 10-Q, and Managements Discussion and Analysis of Financial Condition and Results of Operations Part I, Item 2 of this Form 10-Q.
  • msft_10q_2017-01-26_31_321
    Financial - Income
    Operating income increased $151 million or 3%, primarily due to higher gross margin
  • msft_10q_2017-01-26_111_157
    Revenue - Product
    Net recognized gains on investments increased primarily due to higher gains on sales of equity securities.
  • msft_10q_2017-01-26_109_151
    Revenue - Product
    Net recognized gains on investments increased primarily due to higher gains on sales of equity securities.
  • msft_10q_2017-01-26_109_153
    Revenue - Geography
    Net losses on derivatives decreased due to gains on commodity derivatives in the current period as compared to losses in the prior period and lower losses on foreign currency and equity derivatives.
  • msft_10q_2017-01-26_111_159
    Revenue - Geography
    Net losses on derivatives decreased due to lower losses on commodity and foreign currency derivatives, offset in part by losses on equity derivatives in the current period as compared to gains in the prior period.
  • msft_10q_2017-01-26_128_218
    Financial - Shares / Equity
    On September 16, 2013, our Board of Directors approved a share repurchase program authorizing up to $40.0 billion in share repurchases.
  • msft_10q_2017-01-26_136_238
    Financial - Expense
    These alternatives could result in higher effective tax rates, increased interest expense, or dilution of our earnings.
  • msft_10q_2017-01-26_123_209
    Financial - Income
    Cash from operations increased $3.3 billion to $17.8 billion for the six months ended December 31, 2016, mainly due to an increase in cash received from customers and an income tax refund for overpayment of estimated taxes.
  • msft_10q_2017-01-26_8_304
    Revenue - Product
    Office Commercial revenue grew 5%, driven by Office 365 commercial revenue growth of 47%.
  • msft_10q_2017-01-26_72_101
    Revenue - Product
    Server products and cloud services revenue grew $1.1 billion or 11%, driven by Azure revenue growth of 104%, and 4% growth in revenue from our server products licensed on-premises.
  • msft_10q_2017-01-26_54_58
    Revenue - Product
    Server products and cloud services revenue grew $577 million or 12%, driven by Azure revenue growth of 93%, and 5% growth in revenue from our server products licensed on-premises.
  • msft_10q_2017-01-26_37_38
    Revenue - Product
    Current year diluted EPS was negatively impacted by the net revenue deferral from Windows 10, which resulted in a decrease to diluted EPS of $0.17.
  • msft_10q_2017-01-26_37_40
    Revenue - Product
    Prior year diluted EPS was negatively impacted by the net revenue deferral from Windows 10, which resulted in a decrease to diluted EPS of $0.14.
  • msft_10q_2017-01-26_45_46
    Revenue - Product
    Current year diluted EPS was negatively impacted by the net revenue deferral from Windows 10, which resulted in a decrease to diluted EPS of $0.33.
  • msft_10q_2017-01-26_45_48
    Revenue - Product
    Prior year diluted EPS was negatively impacted by the net revenue deferral from Windows 10, which resulted in a decrease to diluted EPS of $0.23.
  • msft_10q_2017-01-26_10_306
    Revenue - Product
    Server products and cloud services revenue grew 12%, driven by Microsoft Azure Azure revenue growth.
  • msft_10q_2017-01-26_59_70
    Revenue - Product
    Windows Commercial revenue grew 5%, driven by renewals and a higher mix of premium multi-year agreements.
  • msft_10q_2017-01-26_75_113
    Revenue - Product
    Windows Commercial revenue grew 2%, driven by renewals and a higher mix of premium multi-year agreements.
  • msft_10q_2017-01-26_13_309
    Revenue - Product
    Windows Commercial revenue grew 5%, driven by multi-year agreement revenue.
  • msft_10q_2017-01-26_9_305
    Revenue - Product
    Microsoft Dynamics Dynamics revenue grew 7%, driven by Dynamics 365 revenue growth.
  • msft_10q_2017-01-26_78_121
    Revenue - Product
    Xbox software and services revenue increased 13%, driven by a higher volume of Xbox Live transactions and revenue per transaction.
  • msft_10q_2017-01-26_62_78
    Revenue - Product
    Xbox software and services revenue increased 18%, driven by a higher volume of Xbox Live transactions and revenue per transaction.
  • msft_10q_2017-01-26_124_212
    Financial - Debt
    We issued debt to take advantage of favorable pricing and liquidity in the debt markets, reflecting our credit rating and the low interest rate environment.
  • msft_10q_2017-01-26_11_307
    Revenue - Product
    Azure revenue grew 93%, with Azure compute usage more than doubling year-over-year.
  • msft_10q_2017-01-26_58_69
    Revenue - Product
    Windows OEM Pro revenue grew 6%, slightly outperforming a strengthening commercial PC market, and Windows OEM non-Pro revenue grew 5%, outperforming the consumer PC market.
  • msft_10q_2017-01-26_144_258
    Revenue - Product
    Accordingly, revenue from licenses of Windows 10 is recognized ratably over the estimated life of the related device, which ranges between two to four years.
  • msft_10q_2017-01-26_63_84
    Financial - Expense
    Research and development expenses decreased $112 million or 8%, driven by a reduction in phone expenses.
  • msft_10q_2017-01-26_79_126
    Financial - Expense
    Research and development expenses decreased $251 million or 8%, driven by a reduction in phone expenses.
  • msft_10q_2017-01-26_127_368
    Revenue - Product
    If our customers choose to license cloud-based versions of our products and services rather than licensing transaction-based products and services, the associated revenue will shift from being recognized at the time of the transaction to being recognized over the subscription period or upon consumption, as applicable.
  • msft_10q_2017-01-26_70_94
    Financial - Expense
    Operating expenses increased $323 million or 7%, mainly due to LinkedIn expenses and investments in cloud engineering.
  • msft_10q_2017-01-26_52_55
    Financial - Expense
    Operating expenses increased $288 million or 13%, mainly due to LinkedIn expenses and investments in cloud engineering.
  • msft_10q_2017-01-26_75_112
    Revenue - Product
    Windows OEM Pro revenue grew 4%, generally in line with the commercial PC market, and Windows OEM non-Pro revenue grew 2%, outperforming the consumer PC market.
  • msft_10q_2017-01-26_128_219
    Financial - Shares / Equity
    This share repurchase program became effective on October 1, 2013, and was completed on December 22, 2016.
  • msft_10q_2017-01-26_68_341
    Revenue - Product
    Office Consumer revenue increased $214 million or 15%, driven by higher revenue from Office 365 consumer, mainly due to growth in subscribers.
  • msft_10q_2017-01-26_50_335
    Revenue - Product
    Office Consumer revenue increased $156 million or 22%, driven by higher revenue from Office 365 consumer, mainly due to growth in subscribers.
  • msft_10q_2017-01-26_94_143
    Financial - Expense
    Expenses included $195 million related to our acquisition of LinkedIn, including $52 million of amortization of acquired intangible assets.
  • msft_10q_2017-01-26_71_99
    Revenue - Product
    Revenue increased $1.0 billion or 8%, primarily due to higher revenue from server products and cloud services.
  • msft_10q_2017-01-26_53_56
    Revenue - Product
    Revenue increased $518 million or 8%, primarily due to higher revenue from server products and cloud services.
  • msft_10q_2017-01-26_142_247
    Revenue - Product
    If it is determined that implied post-contract customer support PCS is being provided, revenue from the arrangement is deferred and recognized over the implied PCS term.
  • msft_10q_2017-01-26_123_210
    Financial - Debt
    Cash from financing increased $21.8 billion to $17.3 billion, mainly due to a $21.3 billion increase in proceeds from issuances of debt, net of repayments, and a $474 million decrease in cash used for common stock repurchases, offset in part by a $481 million increase in dividends paid.
  • msft_10q_2017-01-26_17_12
    Other - Other
    In July 2015, we announced a plan to restructure our phone business to better focus and align resources.
  • msft_10q_2017-01-26_88_140
    Financial - Expense
    Research and development expenses increased $162 million or 6%, primarily due to increased strategic investments to drive cloud engineering and LinkedIn expenses, offset in part by a reduction in phone expenses.
  • msft_10q_2017-01-26_90_349
    Financial - Expense
    Research and development expenses increased $306 million or 5%, primarily due to increased strategic investments to drive cloud engineering and LinkedIn expenses, offset in part by a reduction in phone expenses.
  • msft_10q_2017-01-26_43_331
    Financial - Expense
    Research and development expenses increased $306 million or 5%, primarily due to increased strategic investments to drive cloud engineering and LinkedIn expenses, offset in part by a reduction in phone expenses.
  • msft_10q_2017-01-26_125_217
    Revenue - Product
    Unearned revenue as of December 31, 2016 also included payments for: Windows 10 licenses post-delivery support and consulting services to be performed in the future Office 365 subscriptions Xbox Live subscriptions LinkedIn Dynamics business solutions products Skype prepaid credits and subscriptions bundled products and services and other offerings for which we have been paid in advance and earn the revenue when we provide the service or software, or otherwise meet the revenue recognition criteria.
  • msft_10q_2017-01-26_148_273
    Other - Other
    These events or circumstances could include a significan
  • msft_10q_2017-01-26_106_146
    Revenue - Geography
    We use derivative instruments to: manage risks related to foreign currencies, equity prices, interest rates, and credit enhance investment returns and facilitate portfolio diversification.
  • msft_10q_2017-01-26_63_81
    Financial - Expense
    Operating expenses decreased $438 million or 12%.
  • msft_10q_2017-01-26_79_124
    Financial - Expense
    Operating expenses decreased $876 million or 13%.
  • msft_10q_2017-01-26_92_351
    Revenue - Product
    Sales and marketing expenses include payroll, employee benefits, stock-based compensation expense, and other headcount-related expenses associated with sales and marketing personnel and the costs of advertising, promotions, trade shows, seminars, and other programs.
  • msft_10q_2017-01-26_30_320
    Revenue - Product
    Revenue increased $294 million or 1%, driven by growth in Productivity and Business Processes
  • msft_10q_2017-01-26_39_328
    Revenue - Product
    Revenue increased $368 million or 1%, driven by growth in Productivity and Business Processes
  • msft_10q_2017-01-26_124_213
    MA - Other
    The proceeds of these issuances were or will be used for general corporate purposes, which may include, among other things, funding for working capital, capital expenditures, repurchases of capital stock, acquisitions, and repayment of existing debt.
  • msft_10q_2017-01-26_152_288
    Other - Other
    Changes in these factors could materially impact our consolidated financial statements.
  • msft_10q_2017-01-26_98_356
    Financial - Expense
    General and administrative expenses include payroll, employee benefits, stock-based compensation expense, severance expense, and other headcount-related expenses associated with finance, legal, facilities, certain human resources and other administrative personnel, certain taxes, and legal and other administrative fees.
  • msft_10q_2017-01-26_47_49
    Revenue - Product
    Revenue increased $692 million or 10%, primarily due to higher revenue from Office 365 and the acquisition of LinkedIn.
  • msft_10q_2017-01-26_51_336
    Revenue - Product
    Dynamics revenue increased 7%, due to higher revenue from Dynamics 365.
  • msft_10q_2017-01-26_69_342
    Revenue - Product
    Dynamics revenue increased 9%, due to higher revenue from Dynamics 365.
  • msft_10q_2017-01-26_65_88
    Revenue - Product
    Revenue increased $1.0 billion or 8%, primarily due to higher revenue from Office 365.
  • msft_10q_2017-01-26_70_96
    Financial - Earnings
    Gross margin increased $251 million or 2%, driven by higher revenue, offset in part by higher cost of revenue.
  • msft_10q_2017-01-26_56_64
    Financial - Earnings
    Gross margin increased $94 million or 2%, driven by higher revenue, offset in part by higher cost of revenue.
  • msft_10q_2017-01-26_73_107
    Financial - Earnings
    Gross margin increased $169 million or 2%, driven by higher revenue, offset in part by higher cost of revenue.
  • msft_10q_2017-01-26_112_161
    Other - Other
    Our effective tax rate for the three months ended December 31, 2016 and 2015 was 18% and 14%, respectively, and our effective tax rate for the six months ended December 31, 2016 and 2015 was 15% and 13%, respectively.
  • msft_10q_2017-01-26_75_110
    Revenue - Product
    Windows revenue increased $162 million or 2%, mainly due to higher revenue from Windows OEM and Windows Commercial.
  • msft_10q_2017-01-26_66_90
    Revenue - Product
    Office Commercial revenue increased $553 million or 5%, driven by higher revenue from Office 365 commercial, mainly due to growth in subscribers, offset in part by lower revenue from products licensed on-premises, reflecting a continued shift to Office 365 commercial.
  • msft_10q_2017-01-26_48_51
    Revenue - Product
    Office Commercial revenue increased $289 million or 5%, driven by higher revenue from Office 365 commercial, mainly due to growth in subscribers, offset in part by lower revenue from products licensed on-premises, reflecting a continued shift to Office 365 commercial.
  • msft_10q_2017-01-26_5_301
    Revenue - Product
    We generate revenue by licensing and supporting an array of software products, by offering a wide range of services, including cloud-based services
  • msft_10q_2017-01-26_77_118
    Revenue - Product
    Surface revenue increased $223 million or 11%, primarily driven by a higher mix of premium devices sold.
  • msft_10q_2017-01-26_75_111
    Revenue - Product
    Windows OEM revenue increased 3%.
  • msft_10q_2017-01-26_58_68
    Revenue - Product
    Windows OEM revenue increased 5%.
  • msft_10q_2017-01-26_12_308
    Revenue - Product
    Windows original equipment manufacturer licensing Windows OEM revenue increased 5%.
  • msft_10q_2017-01-26_61_74
    Revenue - Product
    Devices revenue decreased $914 million or 35%, mainly due to lower revenue from phones.
  • msft_10q_2017-01-26_113_164
    Other - Other
    The prior years second quarter effective tax rate also included a tax benefit related to the retroactive reinstatement of the U.S. research and development tax credit.
  • msft_10q_2017-01-26_142_248
    Revenue - Product
    If updates are determined to not meet the definition of an upgrade, revenue is generally recognized as products are shipped or made available.
  • msft_10q_2017-01-26_142_246
    Revenue - Product
    Software updates are evaluated on a case-by-case basis to determine whether they meet the definition of an upgrade, which may require revenue to be deferred and recognized when the upgrade is delivered.
  • msft_10q_2017-01-26_79_130
    Financial - Expense
    Cost of revenue decreased $966 million or 8%, driven by a reduction in phone sales and lower Xbox hardware cost of revenue, offset in part by an increase in Search advertising traffic acquisition costs and Xbox software and services cost of revenue.
  • msft_10q_2017-01-26_63_87
    Financial - Expense
    Cost of revenue decreased $835 million or 12%, driven by a reduction in phone sales and lower Xbox hardware cost of revenue, offset in part by an increase in Xbox software and services cost of revenue and Search advertising traffic acquisition costs.
  • msft_10q_2017-01-26_34_324
    Financial - Expense
    Research and development expenses increased $162 million or 6%, primarily due to increased strategic investments to drive cloud engineering
  • msft_10q_2017-01-26_106_147
    Financial - Income
    Gains and losses from changes in fair values of derivatives that are not designated as hedges are primarily recognized in other income expense, net.
  • msft_10q_2017-01-26_153_294
    Other - Other
    Variations in the actual outcome of these future tax consequences could materially impact our consolidated financial statements.
  • msft_10q_2017-01-26_143_250
    Revenue - Product
    Where elements are delivered over different periods of time, and when allowed under U.S. GAAP, revenue is allocated to the respective elements based on their relative selling prices at the inception of the arrangement, and revenue is recognized as each element is delivered.
  • msft_10q_2017-01-26_120_193
    Other - Other
    Our securities lending payable balance was $1.3 billion as of December 31, 2016.
  • msft_10q_2017-01-26_120_196
    Other - Other
    Intra-year variances in the amount of securities loaned are mainly due to fluctuations in the demand for the securities.
  • msft_10q_2017-01-26_134_228
    Revenue - Product
    Additions to property and equipment will continue, including new facilities, datacenters, and computer systems for research and development, sales and marketing, support, and administrative staff.
  • msft_10q_2017-01-26_134_227
    Revenue - Product
    We will continue to invest in sales, marketing, product support infrastructure, and existing and advanced areas of technology, as well as continue making acquisitions that align with our business strategy.

 Please wait while we load the requested 10-Q Quarterly Report. If it does not load, please click the link below:

 https://www.last10k.com/sec-filings/report/789019/000156459017000654/msft-10q_20161231.htm

Companies may provide additional information to their SEC Filings as exhibits. Click a link below to view an exhibit that was filed with this report:

Exhibit 15 - LETTER REGARDS UNAUDITED INTERIM FINANCIAL INFORMATION

 Please wait while we load the requested exhibit. If it does not load, please click the link below:

 https://www.last10k.com/sec-filings/report/789019/000156459017000654/msft-ex15_10.htm
Exhibit 31.1 - RULE 13A-14(A)/15D-14(A) CERTIFICATION

 Please wait while we load the requested exhibit. If it does not load, please click the link below:

 https://www.last10k.com/sec-filings/report/789019/000156459017000654/msft-ex311_9.htm
Exhibit 31.2 - RULE 13A-14(A)/15D-14(A) CERTIFICATION

 Please wait while we load the requested exhibit. If it does not load, please click the link below:

 https://www.last10k.com/sec-filings/report/789019/000156459017000654/msft-ex312_8.htm
Exhibit 32.1 - SECTION 1350 CERTIFICATION

 Please wait while we load the requested exhibit. If it does not load, please click the link below:

 https://www.last10k.com/sec-filings/report/789019/000156459017000654/msft-ex321_6.htm
Exhibit 32.2 - SECTION 1350 CERTIFICATION

 Please wait while we load the requested exhibit. If it does not load, please click the link below:

 https://www.last10k.com/sec-filings/report/789019/000156459017000654/msft-ex322_7.htm
  • Form Type: Quarterly
  • Number of times amended: 0
  • Accession Number: 0001564590-17-000654
  • Submitted to the SEC: Thursday, January 26, 2017 4:13:28 PM EST
  • Accepted by the SEC: Thursday, January 26, 2017
  • Period ending: December 2016
  • Industry: Prepackaged Software