EX-99.1 2 d299919dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

Microsoft Cloud Strength Fuels Second Quarter Results

REDMOND, Wash. — January 25, 2022 — Microsoft Corp. today announced the following results for the quarter ended December 31, 2021, as compared to the corresponding period of last fiscal year:

 

   

Revenue was $51.7 billion and increased 20%

   

Operating income was $22.2 billion and increased 24%

   

Net income was $18.8 billion and increased 21%

   

Diluted earnings per share was $2.48 and increased 22%

“Digital technology is the most malleable resource at the world’s disposal to overcome constraints and reimagine everyday work and life,” said Satya Nadella, chairman and chief executive officer of Microsoft. “As tech as a percentage of global GDP continues to increase, we are innovating and investing across diverse and growing markets, with a common underlying technology stack and an operating model that reinforces a common strategy, culture, and sense of purpose.”

“Solid commercial execution, represented by strong bookings growth driven by long-term Azure commitments, increased Microsoft Cloud revenue to $22.1 billion, up 32% year over year” said Amy Hood, executive vice president and chief financial officer of Microsoft.

Business Highlights

Revenue in Productivity and Business Processes was $15.9 billion and increased 19%, with the following business highlights:

 

   

Office Commercial products and cloud services revenue increased 14% driven by Office 365 Commercial revenue growth of 19%

   

Office Consumer products and cloud services revenue increased 15% and Microsoft 365 Consumer subscribers grew to 56.4 million

   

LinkedIn revenue increased 37% (up 36% in constant currency)

   

Dynamics products and cloud services revenue increased 29% driven by Dynamics 365 revenue growth of 45% (up 44% in constant currency)

Revenue in Intelligent Cloud was $18.3 billion and increased 26%, with the following business highlights:

 

   

Server products and cloud services revenue increased 29% driven by Azure and other cloud services revenue growth of 46%

Revenue in More Personal Computing was $17.5 billion and increased 15%, with the following business highlights:

 

   

Windows OEM revenue increased 25%

   

Windows Commercial products and cloud services revenue increased 13% (up 14% in constant currency)

   

Xbox content and services revenue increased 10%

   

Search and news advertising revenue excluding traffic acquisition costs increased 32%


   

Surface revenue increased 8%

Microsoft returned $10.9 billion to shareholders in the form of share repurchases and dividends in the second quarter of fiscal year 2022, an increase of 9% compared to the second quarter of fiscal year 2021.

Business Outlook

Microsoft will provide forward-looking guidance in connection with this quarterly earnings announcement on its earnings conference call and webcast.

Quarterly Highlights, Product Releases, and Enhancements

Every quarter Microsoft delivers hundreds of products, either as new releases, services, or enhancements to current products and services. These releases are a result of significant research and development investments, made over multiple years, designed to help customers be more productive and secure and to deliver differentiated value across the cloud and the edge.

Here are the major product releases and other highlights for the quarter, organized by product categories, to help illustrate how we are accelerating innovation across our businesses while expanding our market opportunities.

Environmental, Social, and Governance (ESG)

To better execute Microsoft’s mission, we focus our Environmental, Social, and Governance (ESG) efforts where we can have the most positive impact. To learn more about our latest initiatives and priorities, please visit our investor relations ESG website.

Webcast Details

Satya Nadella, chairman and chief executive officer, Amy Hood, executive vice president and chief financial officer, Alice Jolla, chief accounting officer, Keith Dolliver, deputy general counsel, and Brett Iversen, general manager of investor relations, will host a conference call and webcast at 2:30 p.m. Pacific time (5:30 p.m. Eastern time) today to discuss details of the company’s performance for the quarter and certain forward-looking information. The session may be accessed at http://www.microsoft.com/en-us/investor. The webcast will be available for replay through the close of business on January 25, 2023.

Constant Currency

Microsoft presents constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars using the average exchange rates from the comparative period rather than the actual exchange rates in effect during the respective periods. All growth comparisons relate to the corresponding period in the last fiscal year. Microsoft has provided this non-GAAP financial information to aid investors in better understanding our performance. The non-GAAP financial measures presented in this release should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP.


Financial Performance Constant Currency Reconciliation

 

     

Three Months Ended December 31,

 

 

   ($ in millions, except per share amounts)

 

  

  Revenue  

 

    

  Operating  
Income

 

    

  Net Income  

 

    

Diluted
  Earnings per  
Share

 

 

  2020 As Reported (GAAP)

  

 

$43,076

 

  

 

$17,897

 

  

 

$15,463

 

  

 

$2.03

 

  2021 As Reported (GAAP)

  

 

$51,728

 

  

 

$22,247

 

  

 

$18,765

 

  

 

$2.48

 

  Percentage Change Y/Y (GAAP)

  

 

20%

 

  

 

24%

 

  

 

21%

 

  

 

22%

 

  Constant Currency Impact

  

 

$(4)

 

  

 

$44

 

  

 

$(10)

 

  

 

$0.00

 

  Percentage Change Y/Y (non-GAAP) Constant Currency

  

 

20%

 

  

 

24%

 

  

 

21%

 

  

 

22%

 

Segment Revenue Constant Currency Reconciliation

 

     

Three Months Ended December 31,

 

 

   ($ in millions)

 

  

Productivity and
Business Processes

 

    

Intelligent Cloud

 

    

More Personal

      Computing      

 

 

  2020 As Reported (GAAP)

  

 

$13,353

 

  

 

$14,601

 

  

 

$15,122

 

  2021 As Reported (GAAP)

  

 

$15,936

 

  

 

$18,327

 

  

 

$17,465

 

  Percentage Change Y/Y (GAAP)

  

 

19%

 

  

 

26%

 

  

 

15%

 

  Constant Currency Impact

  

 

$14

 

  

 

$(32)

 

  

 

$14

 

  Percentage Change Y/Y (non-GAAP) Constant Currency

  

 

19%

 

  

 

26%

 

  

 

15%

 

Selected Product and Service Revenue Constant Currency Reconciliation

 

     

Three Months Ended December 31, 2021

 

 
     

Percentage Change
Y/Y (GAAP)

 

    

Constant Currency
Impact

 

    

Percentage Change

Y/Y (non-GAAP)

Constant

Currency

 

 

  Office Commercial products and cloud services

  

 

14%

 

  

 

0%

 

  

 

14%

 

  Office 365 Commercial

  

 

19%

 

  

 

0%

 

  

 

19%

 

  Office Consumer products and cloud services

  

 

15%

 

  

 

0%

 

  

 

15%

 

  LinkedIn

  

 

37%

 

  

 

(1)%

 

  

 

36%

 

  Dynamics products and cloud services

  

 

29%

 

  

 

0%

 

  

 

29%

 

  Dynamics 365

  

 

45%

 

  

 

(1)%

 

  

 

44%

 

  Server products and cloud services

  

 

29%

 

  

 

0%

 

  

 

29%

 

  Azure and other cloud services

  

 

46%

 

  

 

0%

 

  

 

46%

 

  Windows OEM

  

 

25%

 

  

 

0%

 

  

 

25%

 

  Windows Commercial products and cloud services

  

 

13%

 

  

 

1%

 

  

 

14%

 

  Xbox content and services

  

 

10%

 

  

 

0%

 

  

 

10%

 

  Search and news advertising excluding traffic acquisition costs

  

 

32%

 

  

 

0%

 

  

 

32%

 

  Surface

  

 

8%

 

  

 

0%

 

  

 

8%

 


About Microsoft

Microsoft (Nasdaq “MSFT” @microsoft) enables digital transformation for the era of an intelligent cloud and an intelligent edge. Its mission is to empower every person and every organization on the planet to achieve more.

Forward-Looking Statements

Statements in this release that are “forward-looking statements” are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors such as:

 

   

intense competition in all of our markets that may lead to lower revenue or operating margins;

 

   

increasing focus on cloud-based services presenting execution and competitive risks;

 

   

significant investments in products and services that may not achieve expected returns;

 

   

acquisitions, joint ventures, and strategic alliances that may have an adverse effect on our business;

 

   

impairment of goodwill or amortizable intangible assets causing a significant charge to earnings;

 

   

cyberattacks and security vulnerabilities that could lead to reduced revenue, increased costs, liability claims, or harm to our reputation or competitive position;

 

   

disclosure and misuse of personal data that could cause liability and harm to our reputation;

 

   

the possibility that we may not be able to protect information stored in our products and services from use by others;

 

   

abuse of our advertising or social platforms that may harm our reputation or user engagement;

 

   

the development of the internet of things presenting security, privacy, and execution risks;

 

   

issues about the use of artificial intelligence in our offerings that may result in competitive harm, legal liability, or reputational harm;

 

   

excessive outages, data losses, and disruptions of our online services if we fail to maintain an adequate operations infrastructure;

 

   

quality or supply problems;

 

   

government litigation and regulatory activity relating to competition rules that may limit how we design and market our products;

 

   

potential consequences under trade, anti-corruption, and other laws resulting from our global operations;

 

   

laws and regulations relating to the handling of personal data that may impede the adoption of our services or result in increased costs, legal claims, fines, or reputational damage;


   

claims against us that may result in adverse outcomes in legal disputes;

 

   

uncertainties relating to our business with government customers;

 

   

additional tax liabilities;

 

   

the possibility that we may fail to protect our source code;

 

   

legal changes, our evolving business model, piracy, and other factors may decrease the value of our intellectual property;

 

   

claims that Microsoft has infringed the intellectual property rights of others;

 

   

damage to our reputation or our brands that may harm our business and operating results;

 

   

adverse economic or market conditions that may harm our business;

 

   

catastrophic events or geo-political conditions, such as the COVID-19 pandemic, that may disrupt our business;

 

   

exposure to increased economic and operational uncertainties from operating a global business, including the effects of foreign currency exchange and

 

   

the dependence of our business on our ability to attract and retain talented employees.

For more information about risks and uncertainties associated with Microsoft’s business, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of Microsoft’s SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting Microsoft’s Investor Relations department at (800) 285-7772 or at Microsoft’s Investor Relations website at http://www.microsoft.com/en-us/investor.

All information in this release is as of December 31, 2021. The company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company’s expectations.

For more information, press only:

Microsoft Media Relations, WE Communications for Microsoft, (425) 638-7777, rrt@we-worldwide.com

For more information, financial analysts and investors only:

Brett Iversen, General Manager, Investor Relations, (425) 706-4400

Note to editors: For more information, news and perspectives from Microsoft, please visit the Microsoft News Center at http://www.microsoft.com/news. Web links, telephone numbers, and titles were correct at time of publication, but may since have changed. Shareholder and financial information, as well as today’s 2:30 p.m. Pacific time conference call with investors and analysts, is available at http://www.microsoft.com/en-us/investor.


MICROSOFT CORPORATION

INCOME STATEMENTS

(In millions, except per share amounts) (Unaudited)

 

    

Three Months Ended
December 31,

    

Six Months Ended
December 31,

 
    

     2021

    

          2020

    

     2021

    

          2020

 

 

 

 Revenue:

           

 Product

  

 

$20,779 

 

  

 

$19,460 

 

  

 

$37,410 

 

  

 

$35,263 

 

 Service and other

  

 

30,949 

 

  

 

23,616 

 

  

 

59,635 

 

  

 

44,967 

 

 

    

 

 

    

 

 

    

 

 

 

 Total revenue

  

 

51,728 

 

  

 

43,076 

 

  

 

97,045 

 

  

 

80,230 

 

 

    

 

 

    

 

 

    

 

 

 

 Cost of revenue:

           

 Product

  

 

6,331 

 

  

 

6,058 

 

  

 

10,123 

 

  

 

9,655 

 

 Service and other

  

 

10,629 

 

  

 

8,136 

 

  

 

20,483 

 

  

 

15,541 

 

 

    

 

 

    

 

 

    

 

 

 

 Total cost of revenue

  

 

16,960 

 

  

 

14,194 

 

  

 

30,606 

 

  

 

25,196 

 

 

    

 

 

    

 

 

    

 

 

 

 Gross margin

  

 

34,768 

 

  

 

28,882 

 

  

 

66,439 

 

  

 

55,034 

 

 Research and development

  

 

5,758 

 

  

 

4,899 

 

  

 

11,357 

 

  

 

9,825 

 

 Sales and marketing

  

 

5,379 

 

  

 

4,947 

 

  

 

9,926 

 

  

 

9,178 

 

 General and administrative

  

 

1,384 

 

  

 

1,139 

 

  

 

2,671 

 

  

 

2,258 

 

 

    

 

 

    

 

 

    

 

 

 

 Operating income

  

 

22,247 

 

  

 

17,897 

 

  

 

42,485 

 

  

 

33,773 

 

 Other income, net

  

 

268 

 

  

 

440 

 

  

 

554 

 

  

 

688  

 

 

    

 

 

    

 

 

    

 

 

 

 Income before income taxes

  

 

22,515 

 

  

 

18,337 

 

  

 

43,039 

 

  

 

34,461 

 

 Provision for income taxes

  

 

3,750 

 

  

 

2,874 

 

  

 

3,769 

 

  

 

5,105 

 

 

    

 

 

    

 

 

    

 

 

 

 Net income

  

 

$18,765 

 

  

 

$15,463 

 

  

 

$39,270

 

  

 

$29,356 

 

  

 

 

    

 

 

    

 

 

    

 

 

 

 Earnings per share:

           

 Basic

  

 

$2.50 

 

  

 

$2.05 

 

  

 

$5.23 

 

  

 

$3.88 

 

 Diluted

  

 

$2.48 

 

  

 

$2.03 

 

  

 

$5.19 

 

  

 

$3.85 

 

 Weighted average shares outstanding:

           

 

 

 

 Basic

  

 

7,505 

 

  

 

7,555 

 

  

 

7,509 

 

  

 

7,561 

 

 Diluted

  

 

7,555 

 

  

 

7,616 

 

  

 

7,561 

 

  

 

7,627 

 

 

 


COMPREHENSIVE INCOME STATEMENTS

(In millions) (Unaudited)

 

     Three Months Ended
December 31,
     Six Months Ended
December 31,
 
              2021               2020               2021               2020  

 

 

 Net income

   $ 18,765       $ 15,463       $ 39,270       $ 29,356   
  

 

 

    

 

 

    

 

 

    

 

 

 

 Other comprehensive income (loss), net of tax:

           

 Net change related to derivatives

                          12   

 Net change related to investments

     (743)         (492)         (1,165)         (693)   

 Translation adjustments and other

     (103)         741         (222)         852   

 

  

 

 

    

 

 

    

 

 

    

 

 

 

 Other comprehensive income (loss)

     (846)         257         (1,385)         171   

 

  

 

 

    

 

 

    

 

 

    

 

 

 

 Comprehensive income

   $ 17,919       $ 15,720       $ 37,885       $ 29,527   
  

 

 

    

 

 

    

 

 

    

 

 

 


BALANCE SHEETS

(In millions) (Unaudited)

 

     December 31,
2021 
     June 30,
2021 
 

 

 

 Assets

     

 Current assets:

     

 Cash and cash equivalents

  

 

$20,604 

 

  

 

$14,224 

 

 Short-term investments

  

 

104,765 

 

  

 

116,110 

 

 

    

 

 

 

 Total cash, cash equivalents, and short-term investments

  

 

125,369 

 

  

 

130,334 

 

 Accounts receivable, net of allowance for doubtful accounts of $551 and $751

  

 

33,520 

 

  

 

38,043 

 

 Inventories

  

 

3,019 

 

  

 

2,636 

 

 Other current assets

  

 

12,280 

 

  

 

13,393 

 

 

    

 

 

 

 Total current assets

  

 

174,188 

 

  

 

184,406 

 

 Property and equipment, net of accumulated depreciation of $55,277 and $51,351

  

 

67,214 

 

  

 

59,715 

 

 Operating lease right-of-use assets

  

 

12,354 

 

  

 

11,088 

 

 Equity investments

  

 

6,994 

 

  

 

5,984 

 

 Goodwill

  

 

50,921 

 

  

 

49,711 

 

 Intangible assets, net

  

 

7,462 

 

  

 

7,800 

 

 Other long-term assets

  

 

21,256 

 

  

 

15,075 

 

 

    

 

 

 

 Total assets

  

 

$340,389 

 

  

 

$333,779 

 

  

 

 

    

 

 

 

 Liabilities and stockholders’ equity

     

 Current liabilities:

     

 Accounts payable

  

 

$15,314 

 

  

 

$15,163 

 

 Current portion of long-term debt

  

 

4,998 

 

  

 

8,072 

 

 Accrued compensation

  

 

7,782 

 

  

 

10,057 

 

 Short-term income taxes

  

 

3,731 

 

  

 

2,174 

 

 Short-term unearned revenue

  

 

34,001 

 

  

 

41,525 

 

 Other current liabilities

  

 

11,684 

 

  

 

11,666 

 

 

    

 

 

 

 Total current liabilities

  

 

77,510 

 

  

 

88,657 

 

 Long-term debt

  

 

48,260 

 

  

 

50,074 

 

 Long-term income taxes

  

 

26,121 

 

  

 

27,190 

 

 Long-term unearned revenue

  

 

2,768 

 

  

 

2,616 

 

 Deferred income taxes

  

 

199 

 

  

 

198 

 

 Operating lease liabilities

  

 

10,774 

 

  

 

9,629 

 

 Other long-term liabilities

  

 

14,747 

 

  

 

13,427 

 

 

    

 

 

 

 Total liabilities

  

 

180,379 

 

  

 

191,791 

 

 

    

 

 

 

 Commitments and contingencies

     

 Stockholders’ equity:

     

 Common stock and paid-in capital—shares authorized 24,000; outstanding 7,500 and 7,519

  

 

84,528 

 

  

 

83,111 

 

 Retained earnings

  

 

75,045 

 

  

 

57,055 

 

 Accumulated other comprehensive income

  

 

437 

 

  

 

1,822 

 

 

    

 

 

 

 Total stockholders’ equity

  

 

160,010 

 

  

 

141,988 

 

 

    

 

 

 

 Total liabilities and stockholders’ equity

  

 

            $340,389 

 

  

 

            $333,779 

 

  

 

 

    

 

 

 


CASH FLOWS STATEMENTS

(In millions) (Unaudited)

 

     Three Months Ended 
December 31, 
     Six Months Ended 
December 31, 
 
                 2021                      2020                      2021                  2020  

 

 

 Operations

           

 Net income

     $18,765         $15,463         $39,270         $29,356   

 Adjustments to reconcile net income to net cash from operations:

           

 Depreciation, amortization, and other

     3,496         2,761         6,708         5,406   

 Stock-based compensation expense

     1,897         1,566         3,599         3,022   

 Net recognized gains on investments and derivatives

     (307)         (354)         (671)         (482)   

 Deferred income taxes

     183         (17)         (5,787)         (28)   

 Changes in operating assets and liabilities:

                             

 Accounts receivable

     (5,543)         (4,008)         4,943         4,835   

 Inventories

     394         788         (383)         (20)   

 Other current assets

     830         730         1,770         676   

 Other long-term assets

     (908)         (1,499)         (1,506)         (1,561)   

 Accounts payable

     235         33         (236)         348   

 Unearned revenue

     (4,343)         (3,227)         (7,228)         (6,291)   

 Income taxes

     (2,057)         (2,368)         596         (3,351)   

 Other current liabilities

     1,745         1,755         (2,398)         (1,196)   

 Other long-term liabilities

     93         893         343         1,137   

 

    

 

 

    

 

 

    

 

 

 

 Net cash from operations

     14,480         12,516         39,020         31,851   

 

    

 

 

    

 

 

    

 

 

 

 Financing

           

 Repayments of debt

            (3,250)         (4,826)         (3,250)   

 Common stock issued

     291         302         903         847   

 Common stock repurchased

     (7,433)         (6,535)         (15,117)         (13,278)   

 Common stock cash dividends paid

     (4,652)         (4,230)         (8,858)         (8,086)   

 Other, net

     (192)         79         (364)         (156)   

 

    

 

 

    

 

 

    

 

 

 

 Net cash used in financing

     (11,986)         (13,634)         (28,262)         (23,923)   

 

    

 

 

    

 

 

    

 

 

 

 Investing

           

 Additions to property and equipment

     (5,865)         (4,174)         (11,675)         (9,081)   

 Acquisition of companies, net of cash acquired, and purchases of intangible and other assets

     (850)         (415)         (2,056)         (896)   

 Purchases of investments

     (2,505)         (15,092)        (12,814)         (29,672)   

 Maturities of investments

     5,253         15,264         14,115         29,530   

 Sales of investments

     2,895         2,421         8,525         4,835   

 Other, net

     (89)         327         (506)         (1,756)   

 

    

 

 

    

 

 

    

 

 

 

 Net cash used in investing

     (1,161)         (1,669)         (4,411)         (7,040)   

 

    

 

 

    

 

 

    

 

 

 

 Effect of foreign exchange rates on cash and cash equivalents

     106         14         33         (32)   

 

    

 

 

    

 

 

    

 

 

 

 Net change in cash and cash equivalents

     1,439         (2,773)         6,380         856   

 Cash and cash equivalents, beginning of period

     19,165         17,205         14,224         13,576   

 

    

 

 

    

 

 

    

 

 

 

 Cash and cash equivalents, end of period

     $20,604         $14,432         $20,604         $14,432   
  

 

 

    

 

 

    

 

 

    

 

 

 


SEGMENT REVENUE AND OPERATING INCOME

(In millions) (Unaudited)

 

     Three Months Ended
December 31,
     Six Months Ended
December 31,
 
     2021       2020       2021       2020   

 

 

 Revenue

           

 Productivity and Business Processes

     $15,936         $13,353         $30,975         $25,672   

 Intelligent Cloud

     18,327         14,601         35,291         27,587   

 More Personal Computing

     17,465         15,122         30,779         26,971   

 

    

 

 

    

 

 

    

 

 

 

 Total

     $51,728         $43,076         $97,045         $80,230   
  

 

 

    

 

 

    

 

 

    

 

 

 

 Operating Income

                 

 Productivity and Business Processes

     $7,688         $6,181         $15,269         $11,887   

 Intelligent Cloud

     8,197         6,492         15,759         11,914   

 More Personal Computing

     6,362         5,224         11,457         9,972   

 

    

 

 

    

 

 

    

 

 

 

 Total

     $22,247         $17,897         $42,485         $33,773