Investors' very high expectations were not fully met by these results, which were nevertheless very good overall, with 15% YoY sales growth, record innovations and bookings. It has to be said that the bar was set high before these publications. Investors were mainly focused on growth in cloud services, which fell short of expectations. The stock was down 3% after yesterday's close.

Chart Microsoft Corporation

Key figures

Quarterly results

  • Sales: $64.7 billion, up 15% (16% at constant exchange rates).
  • Gross margin was 70% (down one point) and operating margin 43% (stable).
  • Operating income: $27.9 billion, up 15% (16% at constant exchange rates).
  • Net income: $22.0 billion, up 10% (11% at constant exchange rates).
  • Diluted earnings per share: $2.95, up 10% (11% at constant exchange rates).

Executive statements

Satya Nadella, CEO of Microsoft, emphasized that these results reflect the company's capacity for innovation and the continued confidence of customers. He added that Microsoft strives to meet critical customer needs while remaining at the forefront of the artificial intelligence (AI) era. Amy Hood, executive vice president and CFO, noted that the quarter ended with record bookings and quarterly Microsoft Cloud sales of $36.8 billion, up 21% (22% at constant exchange rates).

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Data by segment

The Intelligent Cloud segment (Azure, Window Server, SQL Server, System Center, GitHub, Nuance, etc.) was up by 19%, driving Group growth, while the traditional Productivity and Business Processes segment (Office and Dynamics services, as well as LinkedIn) grew by 11%. The Personal Computing segment (Windows, Devices, Xbox and Search) grew by 14%.

Productivity and Business Processes

  • Sales: $20.3 billion, up 11% (12% at constant exchange rates).
  • Office Commercial Products and Cloud Services: up 12% (13% at constant exchange rates), with Office 365 Commercial revenues up 13% (14% at constant exchange rates).
  • Office consumer products and cloud services: Increase of 3% (4% at constant exchange rates), with 82.5 million subscribers to Microsoft 365 Consumer.
  • LinkedIn: Sales up 10% (9% at constant exchange rates).
  • Dynamics cloud products and services: 16% increase, with Dynamics 365 revenues up 19% (20% at constant exchange rates).

Intelligent Cloud

  • Sales: $28.5 billion, up 19% (20% at constant exchange rates).
  • Server products and cloud services: up 21% (22% at constant exchange rates), with Azure and other cloud services revenues up 29% (30% at constant exchange rates).

Personal Computing

  • Sales: $15.9 billion, up 14% (15% at constant exchange rates).
  • Windows: Sales up 7% (8% at constant exchange rates), with growth in revenues from Windows OEMs of 4% and from Windows commercial products and cloud services of 11% (12% at constant exchange rates).
  • Devices: Sales down 11% (9% at constant exchange rates).
  • Xbox content and services: 61% increase, mainly due to the acquisition of Activision.
  • Search engine and news advertising revenues: 19% increase, excluding traffic acquisition costs.

Allocation and outlook

For the fiscal year ending June 30, 2024, Microsoft also posted solid results, with sales of $245.1 billion, up 16% (15% at constant exchange rates), operating income of $109.2 billion, and earnings before interest, taxes, depreciation and amortization of $109.2 billion.operating income of $109.4 billion, up 24% (22% non-GAAP, 21% at constant exchange rates), net income of $88.1 billion, up 22% (20% non-GAAP), and diluted earnings per share of $11.80, up 22% (20% non-GAAP). These results demonstrate Microsoft's robustness in various market segments, supported by strong demand for its cloud services and AI solutions.

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"As a platform company, we are focused on meeting the critical needs of our customers through our platforms at scale today, while ensuring that we lead the AI era. "Satya Nadella

Indeed, investors expect a lot from the cloud and AI segment. Azure revenues grew by 29%, with strong demand for AI services. The group still anticipates sustained growth in Azure services in Q1 2025 at 28-29% YoY. Microsoft has expanded its datacenter infrastructure across four continents and Azure AI now has over 60,000 customers, up almost 60%. GitHub Copilot, the AI-powered development tool, is adopted by over 77,000 organizations, up 180%. GitHub has achieved an annual revenue rate of $2 billion, with Copilot accounting for over 40% of this growth.

Microsoft values itself at 31.6 times 2025 earnings. Capex spending must now be converted into operating income over time to merit continuing to value itself at such a multiple. These should continue to rise in 2025. With regard to Capex, Satya Nadella explained that capital investment is primarily demand-driven, and that Microsoft is well positioned to capture opportunities with a diversified product portfolio. Amy Hood added that long-term assets, such as land and data centers, are managed flexibly to meet demand.

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Microsoft generated $23,322 million in free cash flow in the quarter ending June 30, 18% more than last year. Microsoft will return $8.4 billion to shareholders in the form of share buybacks and dividends in the fourth quarter of 2024.