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Microsoft posts another strong set of results, does not know how to invest its profits

Microsoft has announced its quarterly financial statements, reporting revenue of $33.1 billion, up 14% on the same period last year (though fractionally down on the previous quarter).

It does not know how to invest the money it is making. It returned $7.9 billion to shareholders via dividends and buybacks.

What’s notable? The fastest-growing business is Azure, with revenue up by 59%, followed by Dynamics 365 up by 41%.

Office 365 commercial revenue up by 25%, Dynamics 365 up by 41%.

Microsoft notes that it is achieving “higher average revenue per user” on Office 365, indicating some success in adding premium features.

LinkedIn is performing well, revenue up by 25%.

Xbox hardware revenue is down by 34%, but gaming revenue overall down by only 7%. The next hope for gaming will be when the next generation of Xbox appears, Project “Scarlett”, expected this time next year.

In Windows. business revenue is up in both “commercial revenue” (Microsoft 365 and other license sales) and OEM Pro revenue (PCs with Windows 10 Pro installed). However consumer Windows is down 7%. Microsoft says “pressure in the entry level category”, but my guess is that home PCs are just not being replaced and that Chromebooks and iPads are eating into laptop sales.

Quarter ending Sept 30th 2019 vs quarter ending Sept 30th 2018, $millions

Segment Revenue Change Operating income Change
Productivity and Business Processes 11077 +1306 4782 +901
Intelligent Cloud 10845 +2278 3889 +958
More Personal Computing 11133 +387 4015 +872

The segments break down as:

Productivity and Business Processes: Office, Office 365, Dynamics 365 and on-premises Dynamics, LinkedIn

Intelligent Cloud: Server products, Azure cloud services

More Personal Computing: Consumer including Windows, Xbox; Bing search; Surface hardware

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