Microsoft has been essentially printing money for itself ever since Windows 95 was available on store shelves. The company has done incredibly well in the past two decades, regularly pulling in strong revenues and plodding along nicely, even if they use some very annoying accounting practices to hide which departments inside the company are doing poorly. For Q3 2018, it’s a particularly important one for the company because it comes right after two consecutive releases of Windows 10 that have had major issues, and it’s the beginning of the company’s 2019 financial year.
“We are off to a great start in fiscal 2019, a result of our innovation and the trust customers are placing in us to power their digital transformation,” said Satya Nadella, chief executive officer of Microsoft. “We’re excited to help our customers build the digital capability they need to thrive and grow, with a business model that is fundamentally aligned to their success.”
It certainly is a great start for the company. According to their books, revenue increased year-on-year to $29.1 billion, a 19% improvement over the 2018 financial year, operating and net income increased by 29% and 34% respectively, and Microsoft was able to pay shareholders more money per share in their dividends, which increased by 36%. Everything is doing pretty well, especially on the Office side of things, where the commercial and consumer Office and Cloud services recorded jumps in revenue of 17% and 16% respectively.
Once again, LinkedIn somehow makes the company money, although no-one outside of Microsoft can really figure out how they manage that. Microsoft cites “record levels of engagement” to describe how LinkedIn is doing, which could be related to the company’s Office integration boosting LinkedIn’s reach, or simply more people globally entering the workforce and joining the social network. Engagement in LinkedIn’s terms may also apply to people simply endorsing others for specific skills, and not how many people use the networks available to create new connections.
It’s the other departments, though, that are showing signs of slowing growth. Revenue from the Windows OEM group only increased by 3% YoY, a sign of the PC market struggling to cope with the high prices of DDR4 memory and Intel’s processor shortage. Gaming revenue from the Xbox group was up 44%, but Microsoft is quick to note that this comes “mainly from third-party title strength” as part of the Xbox software and services division which saw growth of 36%, which may be another way of saying that their first-party games aren’t doing as well as third party titles on the platform. That also means that the Xbox hardware division grew just 8% compared to the same quarter last year.
The Enterprise Services division also only recorded growth of 6%. Enterprise Services caters to things such as paid Windows 7 updates, Microsoft 365 subscriptions, and so on. It will be a while before this part of the company sees more growth, and it’ll become extremely lucrative as Windows 7 is officially EOL’d by Microsoft in 2020.
All in all, Microsoft had a good quarter for their 2019 financial year, and it’s clear that the Windows as a Service and their cloud offerings are making the company significant amounts of money (more so than their server division currently). Thanks to Azure and Office 365, Microsoft’s future is quite certain.