Microsoft's latest earnings FY24Q3 correspond to calendar 2024 Q1.
Microsoft FY2024 Q3 Earnings Summary:
Revenue rose 17% to a fiscal Q3 record of $61.858B, operating income climbed 23% to a fifth straight record, and net income increased 20% to $21.939B.
Productivity and Business Processes revenue was $19.6B, up 12% year over year, marking the sixth consecutive quarter of record highs; operating profit was $10.1B, up 17% year over year.
Office revenue was approximately $13.8B, up 11% year over year; nearly 60% of Fortune 500 companies are using Microsoft 365 Copilot; Microsoft 365 E5 demand is strong, ARPU continues to rise; Custom Copilot Studio now has over 30,000 companies using it, up 175% sequentially; Teams usage continues to grow year over year; Teams Rooms surpassed 1 million for the first time; Teams Phone surpassed 20 million PSTN users, up nearly 30% year over year.
LinkedIn revenue was $4.1B, up 10% year over year; driven by AI features, LinkedIn Premium revenue grew 29% year over year; hiring market share grew for the seventh consecutive quarter.
Dynamics revenue was $1.6B, up 19% year over year, marking the fifth consecutive quarter of record highs; Copilot for Dynamics 365 launched Copilot for Services/Sales/Finance this quarter; over 330,000 companies have used AI features in Power Platform, including more than half of the Fortune 100; Power Apps MAU exceeded 25M, up 40%+ year over year.
Intelligent Cloud revenue was $26.7B, up 21% year over year, marking the sixth consecutive quarter of record highs; operating profit was $12.5B, up 32% year over year, marking the fifth consecutive quarter of record highs.
Azure revenue was approximately $19B, up 31% year over year, with AI contributing 7 percentage points of growth (from $870M to over $1B sequentially), constrained by supply (compute) rather than demand, otherwise growth would have been higher; Azure market share continues to rise; Azure AI customer count and average spend continue to grow; over 65% of Fortune 500 companies use Azure OpenAI Service; seeing more cloud migration accelerating to Azure; Azure Arc now has 33,000 customers, up 2x year over year; this quarter closed Cloud Software Group and Coca-Cola multi-year, multi-billion-dollar deals; Azure $100M+ deals grew 80%+ year over year, $1B+ deals doubled year over year; Azure non-AI demand is recovering.
Over half of Azure AI customers also use data/analytics tools; Fabric paid customers exceed 11,000, Power BI seamlessly integrated in Fabric, paid users exceed 350,000; GitHub revenue up 45%+ year over year, GitHub Copilot paid subscribers exceed 1.8M, up 35% sequentially, over 90% of Fortune 100 are GitHub customers.
More Personal Computing revenue was $15.6B, up 17% year over year; operating profit was $4.9B, up 16% year over year.
Windows revenue was approximately $5.7B, up 5% year over year, PC slowly recovering; Copilot in Windows has reached 250M Win10/Win11 devices, up 2x sequentially.
Gaming revenue was $5.5B, up 43% year over year; Xbox hardware revenue down 31% year over year, software revenue up 62% year over year; game streaming hours/console usage/monthly active devices hit records for the third consecutive quarter; 7 of the top 25 PlayStation Store games are from Microsoft, ranking first among publishers; Activision Blizzard contributed $1.97B revenue, $990M gross profit, $350M operating loss this quarter; excluding Activision Blizzard, gaming revenue was down 4% year over year.
Search and news advertising revenue was approximately $3.4B, up 12% year over year; Edge share has grown for 12 consecutive quarters, Bing share also rising, Bing DAU exceeds 140M.
Devices revenue down 17% year over year.
Commercial remaining performance obligation increased 20% to $235 billion . Roughly 45% will be recognized in revenue in the next 12 months, up 20% year-over-year. The remaining portion, which will be recognized beyond the next 12 months, increased 21%.
FY24Q4 revenue guided up 13% year over year, operating profit up 10% year over year; Azure up 30%-31% year over year, with AI contribution continuing to increase; Office 365 up 14% year over year; gaming revenue up 40%-44% year over year, with 50% from Activision Blizzard.
FY24Q4 capex expected to increase significantly sequentially, still investing in AI servers; FY25 capex continues to grow; subsequent capex will fluctuate based on data center deployment timing differences.
FY25 full-year revenue and operating profit expected to grow double digits year over year.
Overall, this report again highlights the stability of Microsoft's performance. Azure beat expectations again, Azure AI annualized revenue exceeds $4B. Microsoft SaaS products are fully Copilot-ized, further opening ARPU upside.
The market previously worried that Meta's heavy AI investment would hurt profits, but Microsoft and Google's earnings this quarter again prove that massive AI investment does not necessarily have a large negative impact on profit. All three companies will continue to invest heavily in AI servers. Especially Microsoft's comment that Azure AI revenue is severely supply-constrained is good news for the AI hardware industry.
Microsoft's AI business model is now mature and clear: Azure provides AI MaaS while simultaneously increasing cloud market share, and Copilot opens ARPU upside for Microsoft's SaaS business. As the leader in AI commercialization, we look forward to more surprises from Microsoft.
*All segment revenue figures above are estimates.