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Strong Execution Drives Microsoft First Quarter Results

The following excerpt is from the company's SEC filing.

Windows 10 running on 110 million devices; Commercial cloud annualized revenue run rate exceeds $8.2 billion

REDMOND, Wash. October 22, 2015

Microsoft Corp. today announced the following results for the quarter ended September 30, 2015:

Revenue was $20.4 billion GAAP, and $21.7 billion non-GAAP

Operating income was $5.8 billion GAAP, and $7.1 billion non-GAAP

Net income was $4.6 billion GAAP, and $5.4 billion non-GAAP

Earnings per share was $0.57 GAAP, and $0.67 non-GAAP

Non-GAAP financial results exclude the deferral and recognition of revenue primarily r elated to Windows 10.

During the quarter, Microsoft announced a 16% increase in its quarterly dividend to $0.36 and returned $6.9 billion to shareholders in the form of share repurchases and dividends.

We are making strong progress across each of our three ambitions by delivering innovation people love, said Satya Nadella, chief executive officer at Microsoft. Customer excitement for new devices, Windows 10, Office 365 and Azure is increasing as we bring together the best Microsoft experiences to empower people to achieve more.

The following table reconciles these 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 companys performance. All growth comparisons relate to the corresponding period in the last fiscal year.

Three Months Ended September 30,

($ in millions, except per share amounts)

Income

Net Income

Earnings per

2014 As Reported (GAAP)

$23,201

$5,844

$4,540

Integration and Restructuring Charges

2014 As Adjusted (non-GAAP)

$6,984

$5,449

2015 As Reported (GAAP)

$20,379

$5,793

$4,620

Net Impact from Windows 10 Revenue Deferrals

2015 As Adjusted (non-GAAP)

$21,660

$7,074

$5,380

Percentage Change Y/Y (GAAP)

Percentage Change Y/Y (non-GAAP)

Percentage Change Y/Y (non-GAAP) Constant Currency

Were pleased with our operating results this quarter. With financial discipline and strong execution, we grew operating income by 11 percent in non-GAAP constant currency, said Amy Hood, executive vice president and chief financial officer of Microsoft.

Revenue in Productivity and Business Processes declined 3% (up 4% in constant currency) to $6.3 billion, with the following business highlights:

Office commercial products and cloud services revenue grew 5% in constant currency with Office 365 revenue growth of nearly 70% in constant currency and continued user growth across our productivity offerings

Office 365 consumer subscribers increased to 18.2 million, with approximately 3 million subscribers added in the quarter

Dynamics revenue grew 12% in constant currency, with the Dynamics CRM Online enterprise installed base growing more than 3x year-over-year

Revenue in Intelligent Cloud grew 8% (up 14% in constant currency) to $5.9 billion, with the following business highlights:

Server products and cloud services revenue grew 13% in constant currency, with revenue from premium products and services growing double-digits

Azure revenue and compute usage more than doubled year-over-year

Enterprise Mobility customers more than doubled year-over-year to over 20,000, and the installed base grew nearly 6x year-over-year

Revenue in More Personal Computing declined 17% (down 13% in constant currency) to $9.4 billion, with the following business highlights:

Windows OEM revenue declined 6%, performing better than the overall PC market, as the Windows 10 launch spurred PC ecosystem innovation and helped drive hardware mix toward premium devices

Phone revenue declined 54% in constant currency reflecting our updated strategy

Search advertising revenue excluding traffic acquisition costs grew 29% in constant currency with Bing US market share benefiting from Windows 10 usage

Xbox Live monthly active users grew 28% to 39 million

Were seeing great traction with businesses who want to bring Microsofts cloud, mobile device management technology and data analytics together to improve security and productivity resulting in almost 70 percent year-over-year growth in our commercial cloud run rate, said Kevin Turner, chief operating officer at Microsoft.

Business Outlook

Microsoft will provide forward-looking guidance in connection with this quarterly earnings announcement on its earnings conference call and webcast.

Webcast Details

Satya Nadella, chief executive officer, Amy Hood, executive vice president and chief financial officer, Frank Brod, chief accounting officer, John Seethoff, deputy general counsel, and Chris Suh, general manager of Investor...


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