Microsoft Q1 profit jumps 21%, tops estimates

Microsoft Corporation (NASDAQ: MSFT) reported a 21% jump in earnings for the first quarter of fiscal 2020 as growths in Productivity and Business Processes, Intelligent Cloud, and More Personal Computing segments drove the top line higher. The results exceeded analysts’ expectations.

Net income jumped by 21% to $10.7 billion or $1.38 per share. This exceeded the analysts’ expectation of $1.24 per share.

Revenue climbed by 14% to $33.1 billion, which came in above the consensus estimates of $32.23 billion. Revenue in Productivity and Business Processes segment grew by 13%, that in Intelligent Cloud climbed by 27%, and More Personal Computing division revenue rose by 4%.

Commercial bookings showed a 30% growth helped by strong new business and renewal execution. Commercial cloud revenue surged by 36% to $11.6 billion. Azure revenue soared by 59%. Server product revenue rose by 12% driven by hybrid and premium solutions, demand related to SQL Server 2008 and Windows Server 2008 end of support, and GitHub. Enterprise Mobility installed base increased by 36% to over 120 million seats.

LinkedIn revenue increased 25% with continued strength across all businesses. LinkedIn sessions grew 22% with record levels of engagement and job postings. The higher revenue per search drove search advertising revenue, excluding traffic acquisition costs, higher by 11%. However, Surface revenue declined by 4% due to the timing of product lifecycle transitions.

The healthy Windows 10 demand and strong momentum in advance of Windows 7 end of support drove Windows OEM Pro revenue higher by 19%. On the other hand, the continued pressure in the entry-level category hurt Windows OEM non-Pro revenue that fell by 7%. Windows Commercial products and cloud services revenue grew by 26% driven by an increase in Microsoft 365 agreements.

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Gaming revenue declined by 7% as a decrease in volume of consoles sold hurt Xbox hardware by 34%. Xbox content and services revenue was relatively unchanged with strength in Minecraft and subscriptions offset by a high prior-year comparable from a third-party title.

As of September 30, 2019, there were 47 patent infringement cases pending against Microsoft and none of which are material individually or in aggregate. For the period-end, Microsoft accrued aggregate legal liabilities of $346 million. While intending to defend this vigorously, adverse outcomes that the company estimates could reach about $900 million in aggregate beyond recorded amounts are reasonably possible.

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