Microsoft reports Q4 net income up 20% YoY to $20.1B, revenue up 8% YoY to $56.2B, Office Commercial up 12% YoY, Dynamics 365 up 26% YoY, and LinkedIn up 5% YoY
, as compared to the corresponding period of last fiscal year: · Revenue was $56.2 billion and increased 8% (up 10% in constant currency)
Microsoft - Investor Relations
Context & Ripple Effects
Microsoft’s preceding quarter had already shown broad commercial growth, with revenue up 7% and Office Commercial up 13% in its Q3 commercial-results update. Q4 extends that pattern: Office Commercial remained a double-digit grower while Dynamics 365 grew materially faster.
The comparison with the prior-year Q4 is notable: Microsoft moved from 12% revenue growth and 2% net-income growth in its earlier Q4 report to 8% and 20%, respectively. That points to a more profitable revenue mix even as top-line growth moderated.
First-order effects
Microsoft closes the quarter with $20.1 billion in net income, up 20% year over year, alongside 8% revenue growth—an immediate improvement in earnings growth relative to sales growth.
Dynamics 365’s 26% growth makes it the fastest-growing named business, ahead of Office Commercial’s 12% and LinkedIn’s 5%, reinforcing enterprise applications as a key contributor within Microsoft’s commercial portfolio.
Second-order effects
The gap between Dynamics 365 and Office Commercial growth increases the importance of cross-selling business applications into Microsoft’s existing commercial customer base, rather than relying solely on core productivity-seat expansion.
Enterprise software rivals face a clearer benchmark: Microsoft is reporting double-digit growth across productivity and business applications, raising competitive pressure where those workflows overlap.
Third-order effects
If this mix persists, large enterprise software vendors will increasingly be judged on their ability to monetize connected workflows across productivity, business applications, and professional networks—not on a single flagship product line.
The results support a broader shift toward diversified, recurring commercial software portfolios, though this quarter alone does not establish how durable the relative growth rates will be.
The trend: Microsoft’s Q4 is one data point in the shift toward workflow-native enterprise software monetization, where integrated commercial products can sustain growth across multiple customer functions.
Microsoft CEO Satya Nadella on the Activision Blizzard deal extension: “We continue to work through the regulatory approval process and remain confident about getting the deal done.”
“Capital expenditures jumped to $10.7 billion from $7.8 billion in the fiscal third quarter, after the company told investors that spending would rise as it builds out data centers for AI work.” https://www.reuters.com/...
$MSFT is essentially flat in after-hours. They had a solid quarter, and a high bar because they already announced the key metric a week ago, that is the pricing of Office Copilot. Still waiting on guidance on the conference call that starts at 5:30p ET.
$MSFT just gave guidance and stock has sold off by 3%. In my words, they are saying not to expect an AI revenue inflection point in FY24. Margins to be flat yy as they are scaling AI infrastructure.
Microsoft's Amy Hood: early timing of back to school benefited Windows OEM, but advertising was slightly less than expected, which also impacted search and advertising.
Satya on the Microsoft call today: “Every AI app starts with data and having a comprehensive data and analytics platform is more important than ever.” Furthering the message of you need a data strategy before you have an AI strategy. Need to hit step 1 before step 2
AI server/networking spend at work: $MSFT spent $10.7B on capex in FQ4, up from $7.8B in FQ3 and $8.7B a year ago. $GOOG, OTOH, only saw capex rise $100M Q/Q and $600M Y/Y to $6.9B in Q2. But things might look different in the coming quarters.
$MSFT's FQ1 guide: Productivity & Business Processes - $18B-$18.3B vs. $18.11B consensus Intelligent Cloud - $23.3B-$23.6B vs. $23.54B consensus More Personal Computing - $12.5B-$12.9B vs. a $13.17B consensus Azure growth of 25-26% in CC (consensus is 24%), with a 2-point boost..…
Satya says Microsoft Cloud sales passed $110 billion in the FY 23 with Azure making up more than half of that for the first time. That compares with the about $34 billion for Azure for FY 22 that was disclosed in the Activision trial.
Satya was referring to “Azure and other cloud services” here, a MSFT spox tells me, not pure infrastructure. So the $55b revenue he's discussing is not directly comparable to the $34b Azure infrastructure revenue in 2022 that was disclosed in FTC court docs.
You'll likely see a lot of headlines to the contrary today about MSFT's Q4 FY'23 earnings report. But, as Microsoft itself admits, these numbers don't reflect much revenue impact of AI in spite of its many AI announcements. https://www.geekwire.com/... [image]