Microsoft Corp. announced the following results for the quarter ended June 30, 2021, as compared to the corresponding period of last fiscal year:
- Revenue was $46.2 billion and increased 21%
- Operating income was $19.1 billion and increased 42%
- Net income was $16.5 billion and increased 47%
- Diluted earnings per share was $2.17 and increased 49%
“We are innovating across the technology stack to help organizations drive new levels of tech intensity across their business,” said Satya Nadella, chairman and chief executive officer of Microsoft. “Our results show that when we execute well and meet customers’ needs in differentiated ways in large and growing markets, we generate growth, as we’ve seen in our commercial cloud – and in new franchises we’ve built, including gaming, security, and LinkedIn, all of which surpassed $10 billion in annual revenue over the past three years.”
“As we closed out the fiscal year, our sales teams and partners delivered a strong quarter with over 20% top and bottom-line growth, highlighted by commercial bookings growth of 30% year over year,” said Amy Hood, executive vice president and chief financial officer of Microsoft. “Our commercial cloud revenue grew 36% year over year to $19.5 billion.”
Business Highlights
Revenue in Productivity and Business Processes was $14.7 billion and increased 25% (up 21% in constant currency), with the following business highlights:
- Office Commercial products and cloud services revenue increased 20% (up 15% in constant currency) driven by Office 365 Commercial revenue growth of 25% (up 20% in constant currency)
- Office Consumer products and cloud services revenue increased 18% (up 15% in constant currency) and Microsoft 365 Consumer subscribers increased to 51.9 million
- LinkedIn revenue increased 46% (up 42% in constant currency) driven by Marketing Solutions growth of 97% (up 91% in constant currency)
- Dynamics products and cloud services revenue increased 33% (up 26% in constant currency) driven by Dynamics 365 revenue growth of 49% (up 42% in constant currency)
Revenue in Intelligent Cloud was $17.4 billion and increased 30% (up 26% in constant currency), with the following business highlights:
- Server products and cloud services revenue increased 34% (up 29% in constant currency) driven by Azure revenue growth of 51% (up 45% in constant currency)
Revenue in More Personal Computing was $14.1 billion and increased 9% (up 6% in constant currency), with the following business highlights:
- Windows OEM revenue decreased 3%
- Windows Commercial products and cloud services revenue increased 20% (up 14% in constant currency)
- Xbox content and services revenue decreased 4% (down 7% in constant currency)
- Search advertising revenue excluding traffic acquisition costs increased 53% (up 49% in constant currency)
- Surface revenue decreased 20% (down 23% in constant currency)
Microsoft returned $10.4 billion to shareholders in the form of share repurchases and dividends in the fourth quarter of fiscal year 2021, an increase of 16% compared to the fourth quarter of fiscal year 2020.
Fiscal Year 2021 Results
Microsoft Corp. today announced the following results for the fiscal year ended June 30, 2021, as compared to the corresponding period of last fiscal year:
- Revenue was $168.1 billion and increased 18%
- Operating income was $69.9 billion and increased 32%
- Net income was $61.3 billion GAAP and $60.7 billion non-GAAP, and increased 38% and 37%, respectively
- Diluted earnings per share was $8.05 GAAP and $7.97 non-GAAP, and increased 40% and 38%, respectively
- GAAP results include a $620 million net income tax benefit explained in the Non-GAAP Definition section below
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.
Responding to COVID-19
At Microsoft, our focus remains on ensuring the safety of our employees, striving to protect the health and well-being of the communities in which we operate, and providing technology and resources to our customers and partners to help them build resilience and do their best work from anywhere. Additional information about Microsoft’s COVID-19 response can be found here.
Environmental, Social, and Governance (ESG)
To better execute on Microsoft’s mission, we focus our Environmental, Social, and Governance (ESG) efforts where we can have the most positive impact.
Non-GAAP Definition
The India Supreme Court Decision Impact. In March 2021, the India Supreme Court issued a decision on withholding taxes in the case of Engineering Analysis Centre of Excellence Private Limited vs The Commissioner of Income Tax. Microsoft has historically paid India withholding taxes on software sales through distributor withholding and tax audit assessments in India. The India Supreme Court ruled favorably for companies in 86 separate appeals, some dating back to 2012, holding that software sales are not subject to India withholding taxes. Although Microsoft was not a party to the appeals, Microsoft’s software sales in India were determined to be not subject to withholding taxes. Therefore, Microsoft recorded a net income tax benefit of $620 million in the third quarter of fiscal year 2021 to reflect the results of the India Supreme Court decision impacting fiscal year 1996 through fiscal year 2016.
Microsoft has provided non-GAAP financial measures related to the India Supreme Court decision to aid investors in better understanding our performance. Microsoft believes these non-GAAP measures assist investors by providing additional insight into its operational performance and help clarify trends affecting its business. For comparability of reporting, management considers non-GAAP measures in conjunction with generally accepted accounting principles (GAAP) financial results in evaluating business performance. The non-GAAP financial measures presented in this release should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP.
The following table reconciles our financial results for the fiscal year ended June 30, 2021, reported in accordance with GAAP to non-GAAP financial results. All growth comparisons relate to the corresponding period in the last fiscal year.
| Twelve Months Ended June 30, | ||||||
| ($ in millions, except per share amounts) | Revenue | Operating Income | Net Income | Diluted Earnings per Share | ||
| 2020 As Reported (GAAP) | $143,015 | $52,959 | $44,281 | $5.76 | ||
| 2021 As Reported (GAAP) | $168,088 | $69,916 | $61,271 | $8.05 | ||
| Net income tax benefit related to India Supreme Court decision on withholding taxes | – | – | (620) | (0.08) | ||
| 2021 As Adjusted (non-GAAP) | $168,088 | $69,916 | $60,651 | $7.97 | ||
| Percentage Change Y/Y (GAAP) | 18% | 32% | 38% | 40% | ||
| Percentage Change Y/Y (non-GAAP) | 18% | 32% | 37% | 38% | ||
| Percentage Change Y/Y (non-GAAP) Constant Currency | 15% | 28% | 33% | 34% | ||
Constant Currency
Microsoft presents constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars using the average exchange rates from the comparative period rather than the actual exchange rates in effect during the respective periods. All growth comparisons relate to the corresponding period in the last fiscal year. Microsoft has provided this non-GAAP financial information to aid investors in better understanding our performance. The non-GAAP financial measures presented in this release should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP.
Financial Performance Constant Currency Reconciliation
| Three Months Ended June 30, | ||||
| ($ in millions, except per share amounts) | Revenue | Operating Income | Net Income | Diluted Earnings per Share |
| 2020 As Reported | $38,033 | $13,407 | $11,202 | $1.46 |
| 2021 As Reported | $46,152 | $19,095 | $16,458 | $2.17 |
| Percentage Change Y/Y (GAAP) | 21% | 42% | 47% | 49% |
| Constant Currency Impact | $1,465 | $982 | $749 | $0.10 |
| Percentage Change Y/Y (non-GAAP) Constant Currency | 17% | 35% | 40% | 42% |
| Twelve Months Ended June 30, | ||||
| ($ in millions, except per share amounts) | Revenue | Operating Income | Net Income | Diluted Earnings per Share |
| 2020 As Reported | $143,015 | $52,959 | $44,281 | $5.76 |
| 2021 As Reported | $168,088 | $69,916 | $61,271 | $8.05 |
| 2021 As Adjusted (non-GAAP) | $168,088 | $69,916 | $60,651 | $7.97 |
| Percentage Change Y/Y (GAAP) | 18% | 32% | 38% | 40% |
| Percentage Change Y/Y (non-GAAP) | 18% | 32% | 37% | 38% |
| Constant Currency Impact | $3,039 | $2,070 | $1,974 | $0.26 |
| Percentage Change Y/Y (non-GAAP) Constant Currency | 15% | 28% | 33% | 34% |
Segment Revenue Constant Currency Reconciliation
| Three Months Ended June 30, | |||
| ($ in millions) | Productivity and Business Processes | Intelligent Cloud | More Personal Computing |
| 2020 As Reported | $11,752 | $13,371 | $12,910 |
| 2021 As Reported | $14,691 | $17,375 | $14,086 |
| Percentage Change Y/Y (GAAP) | 25% | 30% | 9% |
| Constant Currency Impact | $523 | $594 | $348 |
| Percentage Change Y/Y (non-GAAP) Constant Currency | 21% | 26% | 6% |
Selected Product and Service Revenue Constant Currency Reconciliation
| Three Months Ended June 30, 2021 | |||
| Percentage Change Y/Y (GAAP) | Constant Currency Impact | Percentage Change Y/Y Constant Currency | |
| Office Commercial products and cloud services | 20% | (5)% | 15% |
| Office 365 Commercial | 25% | (5)% | 20% |
| Office Consumer products and cloud services | 18% | (3)% | 15% |
| 46% | (4)% | 42% | |
| LinkedIn Marketing Solutions | 97% | (6)% | 91% |
| Dynamics products and cloud services | 33% | (7)% | 26% |
| Dynamics 365 | 49% | (7)% | 42% |
| Server products and cloud services | 34% | (5)% | 29% |
| Azure | 51% | (6)% | 45% |
| Windows OEM | (3)% | 0% | (3)% |
| Windows Commercial products and cloud services | 20% | (6)% | 14% |
| Xbox content and services | (4)% | (3)% | (7)% |
| Search advertising excluding traffic acquisition costs | 53% | (4)% | 49% |
| Surface | (20)% | (3)% | (23)% |
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.
