Microsoft Q2: revenue of $36.9B, up 14% YoY, net income of $11.6B, up 38% YoY; Commercial Cloud revenue up 39% YoY to $12.5B; Office 365 Consumer subs hit 37.2M
This January 2020 report is the early marker in the arc the related coverage traces: a $36.9B quarter where the Intelligent Cloud segment that appears a year later is still reported as 'Commercial Cloud,' growing 39% to $12.5B while total revenue grows 14%. The gap between those two numbers is the story — the subscription businesses are outgrowing the company around them.
The consumer side matters less for scale than for structure: 37.2M Office 365 Consumer subscribers convert a one-time license buyer into a recurring bill. Five years on, the same fiscal Q2 lands at $69.6B in revenue, with the cloud line rebranded as Microsoft 365 Commercial products and cloud services — same engine, larger flywheel.
First-order effects
Microsoft's own P&L shows the operating leverage directly: net income up 38% on 14% revenue growth means the Commercial Cloud mix shift, not volume, is doing the margin work this quarter.
The 37.2M Office 365 Consumer subscriber count gives Microsoft a metered consumer base it can reprice annually, replacing upgrade-cycle revenue with predictable subscription cash flow.
Second-order effects
With cloud subscriptions compounding faster than the rest of the company, Microsoft's capital allocation tilts toward datacenter capacity and cloud R&D, squeezing investment in legacy licensed-product lines whose growth rates now lag the corporate average.
A recurring-revenue base growing at 39% makes Microsoft's forward guidance more forecastable, which historically supports premium valuation multiples relative to license-era software peers.
Third-order effects
The reporting structure itself evolves with the business — Commercial Cloud becomes Intelligent Cloud becomes Microsoft 365 Commercial products and cloud services across the coverage window — signaling that Microsoft treats segment definitions as marketing instruments for whichever subscription line is the growth story.
If the pattern in the coverage holds, quarterly revenue roughly doubles between 2020 and 2025 while growth rates compress from 14% toward low double digits — the classic maturation curve of a company whose growth engine has shifted from selling software to renting it.
The trend: Microsoft's quarterly reports chart the industry-wide pivot from licensed software to metered cloud subscriptions, with each year's segment renaming marking the next stage of that monetization shift.
The third party game mentioned above is Fortnite. In that spending in Fortnite is down YoY, to the point that it had a material impact on earnings. Total gaming revenue in 2019 was $10.3 billion, down from $11.5 billion in 2018. https://twitter.com/...
Microsoft was going to kill its Surface hardware in 2019. That's what Canalys, Lenovo, and Dell all thought 🙄Microsoft just finished 2019 with Surface as nearly a $2 billion business https://www.theverge.com/... https://twitter.com/...
Microsoft's @satyanadella reveals more about Xbox: - “hundreds of thousands of people participating in initial trials” of xCloud 🎮 - “Xbox Game Pass subscribers more than doubled this quarter.” 🕹️ - Xbox Live monthly active users record Details: https://www.theverge.com/... https…
Ok here is some pretty incredible news actually coming out of Microsoft's Q2 earning Game Pass subscribers more than DOUBLED this quarter alone That is....frankly incredible growth https://www.theverge.com/...
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Not too unexpected at this point in the lifecycle, although the double digit decline in content and services spending is fairly notable. General takeaway is that subscriptions continue to grow (Game Pass / XBLG) whilst hardware declines. Full game / DLC digital sales are stable.
More Microsoft details: Surface revenue was $1.976 billion, which alllllmost makes Microsoft Surface a $2 billion/quarter operation. Surface revenue was $1.860B a year ago, good for a 6.2% increase.
Microsoft reported that gaming revenue was down 21% YoY for the quarter ending Dec 31st 2019. Both Hardware and Software/Services were down. Software and Services down 11% YoY. Subscriptions partially offset the decline on full game downloads / DLC / Add on Content. https://twitt…
I have always admired Microsoft $MSFT for putting out its full 10Q report almost immediately after its earnings release. Much more detailed. Most companies delay at least a day, some a week or more! https://www.sec.gov/...
Microsoft's Q2 2020 earnings are out. Surface is nearly a $2 billion business Windows did well thx to Windows 7 end of life Cloud and Office are v.strong Gaming is down big, and Microsoft blames Fortnite Details here: https://www.theverge.com/... https://twitter.com/...
Xbox highlights from Microsoft's Q2 2020 earnings: ✅21% decline in revenue (down $905 million) ✅Content & Services revenue down 11% ✅Hardware revenue down 43% https://twitter.com/...
Xbox One sucked because they had the most embarrassing PR fuckup in the history of consoles by making Xbox One always online, couldn't able to play used games and bundled with Kinect. Yeah sure they decided not to do that in the last minute but the damage had already been done. h…