Through its quarterly earnings report (Q2 fiscal 2019, Q4 2018 calendar), Microsoft announced revenue of $32.5 billion, up 12% year-on-year. The bumper revenue resulted in a good payday for the company, with net income of $8.4 billion, up 14%. So why a mixed bag? Well, while several of Microsoft’s divisions continued to thrive, perhaps the two most synonymous with the company remained static. In personal computing, Windows OEM declined 5% as the PC market contracted through the last quarter. This was a weaker PC market than Microsoft had predicted, largely because of an ongoing lack of chip availability. Shipments of PCs declines 3.7 percent year-on-year during Q4, at 68.1 million units. A trade war between Chine and the USA has impacted chipmakers such as Intel. Microsoft says it expects the supply problem to continue and impact its next two quarterly earnings reports. Office also failed to pick up speed, managing just a 1% year-on-year growth. Microsoft once again put the blame on the weaker than expected PC market. No information was given about how that growth spread between Office 365 and the regular suite. However, Microsoft said there are now 33.3 million Office 365 Consumer subscribers.
Good News
As the overlying figures suggest, this was not a failed quarter. In fact, Microsoft is continuing to thrive beyond the extenuating circumstances surrounding personal PC. The company reports a 13% growth in Productivity and Business Processes, thanks to Office 365 Commercial and LinkedIn. Indeed, LinkedIn enjoyed a revenue growth of 29%, while Dynamics products increased 17%. Notably, Dynamics 365 enjoyed stellar growth, increasing revenue by 51% last frame. Intelligent cloud has become Microsoft’s core business and continued its excellent run of success last quarter with a 20% revenue boost. Azure led the way with a massive 76% increase year-on-year. Finally, Xbox continues to reap rewards for Microsoft despite falling behind Sony’s PS4 in terms of sales. The company’s gaming division increased revenue 8%, with Xbox software services bumping 31%. However, hardware revenue declines by 19% year-on-year. That does not necessarily point to low sales during Q4, simply because Microsoft launched the Xbox One X in Q4 2017.
