Microsoft reports $30.1 billion in Q4 2018 revenue: Azure up 89%, Surface up 25%, and Windows up 7%

Microsoft today reported earnings for its fourth fiscal quarter of 2018, including revenue of $30.1 billion, net income of $8.9 billion, and earnings per share of $1.14 (compared to revenue of $23.3 billion, net income of $6.5 billion, and earnings per share of $0.83 in Q4 2017). All three of the company’s operating groups saw double-digit year-over-year growth.

Analysts had expected Microsoft to earn $29.21 billion in revenue and earnings per share of $1.08. The company destroyed expectations. The company’s stock was down slightly in regular trading, but up 1 percent in after-hours trading. Microsoft said it returned $5.3 billion to shareholders in the form of share repurchases and dividends during the quarter.

“We had an incredible year, surpassing $100 billion in revenue as a result of our teams’ relentless focus on customer success and the trust customers are placing in Microsoft,” Microsoft CEO Satya Nadella said in a statement. “Our early investments in the intelligent cloud and intelligent edge are paying off, and we will continue to expand our reach in large and growing markets with differentiated innovation.”

$100 billion in revenue for the year is impressive. The consistent quarterly success can be attributed to Nadella’s plan to turn Microsoft into a cloud company. In October, Microsoft’s cloud annualized run rate passed $20 billion, ahead of schedule.

Here are the highlights across Microsoft’s three operating groups:

• Productivity and Business Processes: Up 13 percent to $9.7 billion. Office commercial revenue grew 10 percent, Office consumer and cloud revenue was up 8 percent, and Dynamics revenue increased 11 percent. LinkedIn revenue jumped a whopping 37 percent. Office 365 subscribers hit 31.4 million.
• Intelligent Cloud: Up 23 percent to $9.6 billion. Server products and cloud services revenue grew 26 percent, while Enterprise Services revenue increased 8 percent. The big number as always was Azure revenue, which took off by 89 percent.
• More Personal Computing: Up 17 percent at $10.8 billion. Windows OEM revenue was up 7 percent, while Windows commercial revenue increased 23 percent. Search acquisition advertising revenue minus traffic acquisition costs jumped 17 percent. Surface revenue increased by 25 percent, and gaming revenue was up 39 percent (driven largely by Xbox software and service growth).

It looks like Microsoft is starting to monetize its LinkedIn acquisition well. It has been two years since Microsoft announced plans to acquire LinkedIn, although the acquisition only closed in December 2016. After Microsoft confirmed its intent to acquire GitHub, we’ll be watching to see if it can manage that investment as wisely.

The impressive growth of the Surface would appear to indicate that the Surface Book 2, the company’s most expensive laptop-tablet hybrid, is selling well. On the other end of the lineup is the newly announced Surface Go, but that little guy doesn’t start shipping until next month — it will be a few quarters until we can try to gauge its sales.