Strong Execution Drives Microsoft Q1 2016 Results

Microsoft has released its Q1 2016 earnings (ended September 30, 2015), with the following highlights:

• 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

First Earnings Under New Financial Reporting Structure

Microsoft in September announced a new financial reporting structure starting in FY 2016 that divides its products into three operating segments being 1) Productivity and Business Processes, 2) Intelligent Cloud, and 3) More Personal Computing. Dynamics CRM and ERP are now part of "Productivity and Business Processes," along with commercial and consumer versions of Office and Office 365. Previously, Dynamics was found under the Commercial segment, with CRM Online under the "Commercial Other."

Q1 Revenues in the Productivity and Business Processes segment declined 3% but were up 4% in constant currency (CC), which adjusts for currency fluctuations, to $6.3 billion. Microsoft in fact cites "strong performance of Office 365 and Dynamics CRM Online offset by [the] negative impact from foreign currency." Among the highlights:

• Dynamics revenue grew 12% CC, with the Dynamics CRM Online enterprise installed base growing more than 3x year-over-year
• Dynamics CRM Online enterprise installed base grew more than 3x year-over-year, and 3 out of 4 new Dynamics CRM customers chose cloud deployment
• Office commercial products and cloud services revenue grew 5% CC with Office 365 revenue growth of nearly 70% CC and continued user growth across productivity offerings
• Office 365 commercial seats grew 66%, and premium workloads now comprise nearly 60% of the Office 365 installed base
• Office 365 consumer subscribers increased to 18.2 million, with approximately 3 million subscribers added in the quarter

Revenue ...