Microsoft Corporation (NASDAQ:MSFT) announced the following results for the quarter ended December 31, 2015:
- Revenue was $23.8 billion GAAP, and $25.7 billion non-GAAP
- Operating income was $6.0 billion GAAP, and $7.9 billion non-GAAP
- Net income was $5.0 billion GAAP, and $6.3 billion non-GAAP
- Earnings per share was $0.62 GAAP, and $0.78 non-GAAP
During the quarter, Microsoft returned $6.5 billion to shareholders in the form of share repurchases and dividends.
“Businesses everywhere are using the Microsoft Cloud as their digital platform to drive their ambitious transformation agendas,” said Satya Nadella, chief executive officer at Microsoft. “Businesses are also piloting Windows 10, which will drive deployments beyond 200 million active devices.”
The following table reconciles our financial results reported in accordance with generally accepted accounting principles (“GAAP”) to non-GAAP financial results. Microsoft has provided this non-GAAP financial information to aid investors in better understanding the company’s performance. All growth comparisons relate to the corresponding period in the last fiscal year.
| Three Months Ended December 31, | ||||||
| ($ in millions, except per share amounts) | Revenue | Operating Income | Net Income | Earnings per Share | ||
| 2014 As Reported (GAAP) | $26,470 | $7,776 | $5,863 | $0.71 | ||
| Net Impact from Revenue Deferrals | (326) | (326) | (248) | (0.03) | ||
| Integration and Restructuring Charges | – | 243 | 175 | 0.02 | ||
| 2014 As Adjusted (non-GAAP) | $26,144 | $7,693 | $5,790 | $0.70 | ||
| 2015 As Reported (GAAP) | $23,796 | $6,026 | $4,998 | $0.62 | ||
| Net Impact from Revenue Deferrals | 1,897 | 1,897 | 1,277 | 0.16 | ||
| 2015 As Adjusted (non-GAAP) | $25,693 | $7,923 | $6,275 | $0.78 | ||
| Percentage Change Y/Y (GAAP) | (10)% | (23)% | (15)% | (13)% | ||
| Percentage Change Y/Y (non-GAAP) | (2)% | 3% | 8% | 11% | ||
| Percentage Change Y/Y (non-GAAP) Constant Currency | 3% | 13% | 20% | 23% | ||
“We delivered double-digit operating income growth in non-GAAP constant currency while investing in key strategic areas that position Microsoft for continued long term growth,” said Amy Hood, executive vice president and chief financial officer of Microsoft.
Revenue in Productivity and Business Processes declined 2% (up 5% in constant currency) to $6.7 billion, with the following business highlights:
- Office commercial products and cloud services revenue grew 5% in constant currency driven by Office 365 revenue growth of nearly 70% in constant currency
- Office 365 consumer subscribers increased to 20.6 million
- Dynamics revenue grew 11% in constant currency with Dynamics CRM Online seat adds more than doubling year-over-year for the fifth consecutive quarter
Revenue in Intelligent Cloud grew 5% (up 11% in constant currency) to $6.3 billion, with the following business highlights:
- Server products and cloud services revenue grew 10% in constant currency
- Azure revenue grew 140% in constant currency with revenue from Azure premium services growing nearly 3x year-over-year
- Over one third of the Fortune 500 have chosen our Enterprise Mobility solutions, up nearly 3x year-over-year
Revenue in More Personal Computing declined 5% (down 2% in constant currency) to $12.7 billion, with the following business highlights:
- Windows OEM revenue declined 5% in constant currency, outperforming the PC market, driven by higher consumer premium and mid-range device mix
- Surface revenue increased 29% in constant currency driven by the launch of Surface Pro 4 and Surface Book
- Phone revenue declined 49% in constant currency reflecting our strategy change announced in July 2015
- Search advertising revenue excluding traffic acquisition costs grew 21% in constant currency with continued benefit from Windows 10 usage
- Xbox Live monthly active users grew 30% year-over-year to a record 48 million
“It was a strong holiday season for Microsoft highlighted by Surface and Xbox,” said Kevin Turner, chief operating officer at Microsoft. “Our commercial business executed well as our sales teams and partners helped customers realize the value of Microsoft’s cloud technologies across Azure, Office 365 and CRM Online.”
Business Outlook
Microsoft will provide forward-looking guidance in connection with this quarterly earnings announcement on its earnings conference call and webcast. (Original Source)
Shares of Microsoft are up nearly 7% to $55.65 in after-hours trading. MSFT has a 1-year high of $56.85 and a 1-year low of $39.72. The stock’s 50-day moving average is $53.79 and its 200-day moving average is $49.15.
On the ratings front, Microsoft has been the subject of a number of recent research reports. In a report released today, Pacific Crest analyst Brendan Barnicle reiterated a Buy rating on MSFT, with a price target of $65, which represents a potential upside of 25.3% from where the stock is currently trading. Separately, on January 26, Bernstein Research’s Mark Moerdler reiterated a Buy rating on the stock and has a price target of $64.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Brendan Barnicle and Mark Moerdler have a total average return of 11.0% and 3.8% respectively. Barnicle has a success rate of 67.5% and is ranked #192 out of 3596 analysts, while Moerdler has a success rate of 59.7% and is ranked #675.
The street is mostly Bullish on MSFT stock. Out of 15 analysts who cover the stock, 14 suggest a Buy rating and one recommends to Hold the stock. The 12-month average price target assigned to the stock is $62.30, which represents a potential upside of 20.1% from where the stock is currently trading.