https://www.microsoft.com/en-us/investor/earnings/fy-2023-q2/press-release-webcast [] Skip to main content [RE1Mu3b] Microsoft Investor Relations Investor Relations Investor Relations * Home * Investor Relations + Home + Company Information + Board & ESG + Annual Reports + SEC Filings + Events + Investor Information + Contacts * Earnings Releases + Press Release & Webcast + Financial Statements Financial Statements o Income Statements o Comprehensive Income o Balance Sheets o Cash Flows o Segment Revenue & Operating Income + Performance + Metrics + Segment Results Segment Results o Productivity and Business Processes o Intelligent Cloud o More Personal Computing * Financial Statements + Income Statements + Comprehensive Income + Balance Sheets + Cash Flows + Segment Revenue & Operating Income * Trended Historical Financials + Quarterly Income Statements + Segment History + Yearly Income Statements + Return of Cash to Shareholders + Capital Expenditure + Key Metrics * More * All Microsoft + Global o Microsoft 365 o Teams o Windows o Surface o Xbox o Deals o Small Business o Support + Software Software o Windows Apps o OneDrive o Outlook o Skype o OneNote o Microsoft Teams o Microsoft Edge + PCs & Devices PCs & Devices o Computers o Shop Xbox o Accessories o VR & mixed reality o Phones + Entertainment Entertainment o Xbox Game Pass Ultimate o PC Game Pass o Xbox games o PC games o Windows digital games o Movies & TV + Business Business o Microsoft Cloud o Microsoft Security o Dynamics 365 o Microsoft 365 for business o Microsoft Power Platform o Windows 365 o Microsoft Industry o Small Business + Developer & IT Developer & IT o Azure o Developer Center o Documentation o Microsoft Learn o Microsoft Tech Community o Azure Marketplace o AppSource o Visual Studio + Other Other o Microsoft Rewards o Free downloads & security o Education o Virtual workshops and training o Gift cards o Students and parents deals o Licensing o Microsoft Experience Center + View Sitemap [ ] Search Search Microsoft.com * No results Cancel Browse Prior Earnings Releases: Browse Prior Earnings Releases: Fiscal Year [2023] Quarter [Q1] GO RESET FILTER Press Release & Webcast Earnings Release FY23 Q2 Microsoft Cloud Strength Drives Second Quarter Results REDMOND, Wash. -- January 24, 2023 -- Microsoft Corp. today announced the following results for the quarter ended December 31, 2022, as compared to the corresponding period of last fiscal year: * Revenue was $52.7 billion and increased 2% * Operating income was $20.4 billion GAAP and $21.6 billion non-GAAP, and decreased 8% and 3%, respectively * Net income was $16.4 billion GAAP and $17.4 billion non-GAAP, and decreased 12% and 7%, respectively * Diluted earnings per share was $2.20 GAAP and $2.32 non-GAAP, and decreased 11% and 6%, respectively "The next major wave of computing is being born, as the Microsoft Cloud turns the world's most advanced AI models into a new computing platform," said Satya Nadella, chairman and chief executive officer of Microsoft. "We are committed to helping our customers use our platforms and tools to do more with less today and innovate for the future in the new era of AI." "We are focused on operational excellence as we continue to invest to drive growth. Microsoft Cloud revenue was $27.1 billion, up 22% (up 29% in constant currency) year-over-year as our commercial offerings continue to drive value for our customers," said Amy Hood, executive vice president and chief financial officer of Microsoft. The following table reconciles our financial results reported in accordance with generally accepted accounting principles (GAAP) to non-GAAP financial results. Additional information regarding our non-GAAP definition is provided below. All growth comparisons relate to the corresponding period in the last fiscal year. +--------------------------------------------------------------------+ | | Three Months Ended December 31, | | |--------------------------------------------------------------------| | | | | |Diluted | | | | | |Earnings| | ($ in millions, except per share| |Operating| Net | per | | amounts) |Revenue| Income |Income | Share | |---------------------------------+-------+---------+-------+--------| | 2021 As Reported (GAAP) |$51,728| $22,247|$18,765| $2.48| |---------------------------------+-------+---------+-------+--------| | 2022 As Reported (GAAP) |$52,747| $20,399|$16,425| $2.20| |---------------------------------+-------+---------+-------+--------| | Severance, hardware-related | | | | | | impairment, and lease | -| 1,171| 946| 0.12| | consolidation costs | | | | | |---------------------------------+-------+---------+-------+--------| | 2022 As Adjusted |$52,747| $21,570|$17,371| $2.32| |---------------------------------+-------+---------+-------+--------| | Percentage Change Y/Y (GAAP) | 2%| (8)%| (12)%| (11)%| |---------------------------------+-------+---------+-------+--------| | Percentage Change Y/Y Constant | 7%| 0%| (4)%| (3)%| | Currency | | | | | |---------------------------------+-------+---------+-------+--------| | Percentage Change Y/Y (As | 2%| (3)%| (7)%| (6)%| | Adjusted) | | | | | |---------------------------------+-------+---------+-------+--------| |Percentage Change Y/Y (As | 7%| 6%| 1%| 2%| |Adjusted) Constant Currency | | | | | |---------------------------------+-------+---------+-------+--------| +--------------------------------------------------------------------+ Business Highlights Revenue in Productivity and Business Processes was $17.0 billion and increased 7% (up 13% in constant currency), with the following business highlights: * Office Commercial products and cloud services revenue increased 7% (up 14% in constant currency) driven by Office 365 Commercial revenue growth of 11% (up 18% in constant currency) * Office Consumer products and cloud services revenue decreased 2% (up 3% in constant currency) and Microsoft 365 Consumer subscribers grew to 63.2 million * LinkedIn revenue increased 10% (up 14% in constant currency) * Dynamics products and cloud services revenue increased 13% (up 20% in constant currency) driven by Dynamics 365 revenue growth of 21% (up 29% in constant currency) Revenue in Intelligent Cloud was $21.5 billion and increased 18% (up 24% in constant currency), with the following business highlights: * Server products and cloud services revenue increased 20% (up 26% in constant currency) driven by Azure and other cloud services revenue growth of 31% (up 38% in constant currency) Revenue in More Personal Computing was $14.2 billion and decreased 19% (down 16% in constant currency), with the following business highlights: * Windows OEM revenue decreased 39% * Windows Commercial products and cloud services revenue decreased 3% (up 3% in constant currency) * Xbox content and services revenue decreased 12% (down 8% in constant currency) * Search and news advertising revenue excluding traffic acquisition costs increased 10% (up 15% in constant currency) * Devices revenue decreased 39% (down 34% in constant currency) Microsoft returned $9.7 billion to shareholders in the form of share repurchases and dividends in the second quarter of fiscal year 2023, a decrease of 11% compared to the second quarter of fiscal year 2022. Business Outlook Microsoft will provide forward-looking guidance in connection with this quarterly earnings announcement on its earnings conference call and webcast. Quarterly Highlights, Product Releases, and Enhancements Every quarter Microsoft delivers hundreds of products, either as new releases, services, or enhancements to current products and services. These releases are a result of significant research and development investments, made over multiple years, designed to help customers be more productive and secure and to deliver differentiated value across the cloud and the edge. Here are the major product releases and other highlights for the quarter, organized by product categories, to help illustrate how we are accelerating innovation across our businesses while expanding our market opportunities. Environmental, Social, and Governance (ESG) To better execute on Microsoft's mission, we focus our Environmental, Social, and Governance (ESG) efforts where we can have the most positive impact. To learn more about our latest initiatives and priorities, please visit our investor relations ESG website. Webcast Details Satya Nadella, chairman and chief executive officer, Amy Hood, executive vice president and chief financial officer, Alice Jolla, chief accounting officer, Keith Dolliver, deputy general counsel, and Brett Iversen, vice president of investor relations, will host a conference call and webcast at 2:30 p.m. Pacific time (5:30 p.m. Eastern time) today to discuss details of the company's performance for the quarter and certain forward-looking information. The session may be accessed at http://www.microsoft.com/en-us/investor. The webcast will be available for replay through the close of business on January 24, 2024. Non-GAAP Definition Q2 charge. In the second quarter of fiscal year 2023, Microsoft recorded costs related to decisions announced on January 18th, including employee severance expenses of $800 million, impairment charges resulting from changes to our hardware portfolio, and costs related to lease consolidation activities. Microsoft has provided non-GAAP financial measures related to the impact of these strategic reprioritization actions to aid investors in better understanding our performance. Microsoft believes these non-GAAP measures assist investors by providing additional insight into its operational performance and help clarify trends affecting its business. For comparability of reporting, management considers non-GAAP measures in conjunction with GAAP financial results in evaluating business performance. The non-GAAP financial measures presented in this release should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP. Constant Currency Microsoft presents constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars using the average exchange rates from the comparative period rather than the actual exchange rates in effect during the respective periods. All growth comparisons relate to the corresponding period in the last fiscal year. Microsoft has provided this non-GAAP financial information to aid investors in better understanding our performance. The non-GAAP financial measures presented in this release should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP. Financial Performance Constant Currency Reconciliation Three Months Ended December 31, Diluted Earnings ($ in millions, except per share Operating Net per amounts) Revenue Income Income Share 2021 As Reported (GAAP) $51,728 $22,247 $18,765 $2.48 2022 As Reported (GAAP) $52,747 $20,399 $16,425 $2.20 2022 As Adjusted $52,747 $21,570 $17,371 $2.32 Percentage Change Y/Y (GAAP) 2% (8)% (12)% (11)% Percentage Change Y/Y (As Adjusted) 2% (3)% (7)% (6)% Constant Currency Impact $ $(1,931) $ $(0.21) (2,645) (1,563) Percentage Change Y/Y Constant 7% 0% (4)% (3)% Currency Percentage Change Y/Y (As Adjusted) 7% 6% 1% 2% Constant Currency Segment Revenue Constant Currency Reconciliation Three Months Ended December 31, Productivity More and Business Intelligent Personal ($ in millions) Processes Cloud Computing 2021 As Reported (GAAP) $15,936 $18,262 $17,530 2022 As Reported (GAAP) $17,002 $21,508 $14,237 Percentage Change Y/Y (GAAP) 7% 18% (19)% Constant Currency Impact $(1,002) $(1,078) $(565) Percentage Change Y/Y Constant 13% 24% (16)% Currency We have recast certain prior period amounts to conform to the way we internally manage and monitor our business. Selected Product and Service Revenue Constant Currency Reconciliation Three Months Ended December 31, 2022 Percentage Percentage Constant Change Y/Y Change Y/Y Currency Constant (GAAP) Impact Currency Microsoft Cloud revenue 22% 7% 29% Office Commercial products and 7% 7% 14% cloud services Office 365 Commercial 11% 7% 18% Office Consumer products and (2)% 5% 3% cloud services LinkedIn 10% 4% 14% Dynamics products and cloud 13% 7% 20% services Dynamics 365 21% 8% 29% Server products and cloud 20% 6% 26% services Azure and other cloud services 31% 7% 38% Windows OEM (39)% 0% (39)% Windows Commercial products and (3)% 6% 3% cloud services Xbox content and services (12)% 4% (8)% Search and news advertising excluding traffic acquisition 10% 5% 15% costs Devices (39)% 5% (34)% About Microsoft Microsoft (Nasdaq "MSFT" @microsoft) enables digital transformation for the era of an intelligent cloud and an intelligent edge. Its mission is to empower every person and every organization on the planet to achieve more. Forward-Looking Statements Statements in this release that are "forward-looking statements" are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors such as: * intense competition in all of our markets that may lead to lower revenue or operating margins; * increasing focus on cloud-based services presenting execution and competitive risks; * significant investments in products and services that may not achieve expected returns; * acquisitions, joint ventures, and strategic alliances that may have an adverse effect on our business; * impairment of goodwill or amortizable intangible assets causing a significant charge to earnings; * cyberattacks and security vulnerabilities that could lead to reduced revenue, increased costs, liability claims, or harm to our reputation or competitive position; * disclosure and misuse of personal data that could cause liability and harm to our reputation; * the possibility that we may not be able to protect information stored in our products and services from use by others; * abuse of our advertising, professional, marketplace, or gaming platforms that may harm our reputation or user engagement; * the development of the internet of things presenting security, privacy, and execution risks; * issues about the use of artificial intelligence in our offerings that may result in competitive harm, legal liability, or reputational harm; * excessive outages, data losses, and disruptions of our online services if we fail to maintain an adequate operations infrastructure; * quality or supply problems; * government litigation and regulatory activity relating to competition rules that may limit how we design and market our products; * potential consequences under trade, anti-corruption, and other laws resulting from our global operations; * laws and regulations relating to the handling of personal data that may impede the adoption of our services or result in increased costs, legal claims, fines, or reputational damage; * claims against us that may result in adverse outcomes in legal disputes; * uncertainties relating to our business with government customers; * additional tax liabilities; * the possibility that we may fail to protect our source code; * legal changes, our evolving business model, piracy, and other factors may decrease the value of our intellectual property; * claims that Microsoft has infringed the intellectual property rights of others; * damage to our reputation or our brands that may harm our business and operating results; * adverse economic or market conditions that may harm our business; * catastrophic events or geo-political conditions, such as the COVID-19 pandemic, that may disrupt our business; * exposure to increased economic and operational uncertainties from operating a global business, including the effects of foreign currency exchange and * the dependence of our business on our ability to attract and retain talented employees. For more information about risks and uncertainties associated with Microsoft's business, please refer to the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" sections of Microsoft's SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting Microsoft's Investor Relations department at (800) 285-7772 or at Microsoft's Investor Relations website at http://www.microsoft.com/ en-us/investor. All information in this release is as of December 31, 2022. The company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company's expectations. For more information, press only: Microsoft Media Relations, WE Communications for Microsoft, (425) 638-7777, rrt@we-worldwide.com For more information, financial analysts and investors only: Brett Iversen, Vice President, Investor Relations, (425) 706-4400 Note to editors: For more information, news and perspectives from Microsoft, please visit the Microsoft News Center at http:// www.microsoft.com/news. Web links, telephone numbers, and titles were correct at time of publication, but may since have changed. Shareholder and financial information, as well as today's 2:30 p.m. Pacific time conference call with investors and analysts, is available at http://www.microsoft.com/en-us/investor. MICROSOFT CORPORATION INCOME STATEMENTS (In millions, except per share amounts) (Unaudited) Three Months Ended Six Months Ended December 31, December 31, 2022 2021 2022 2021 Revenue: Product $16,517 $20,779 $32,258 $37,410 Service and other 36,230 30,949 70,611 59,635 Total revenue 52,747 51,728 102,869 97,045 Cost of revenue: Product 5,690 6,331 9,992 10,123 Service and other 11,798 10,629 22,948 20,483 Total cost of revenue 17,488 16,960 32,940 30,606 Gross margin 35,259 34,768 69,929 66,439 Research and development 6,844 5,758 13,472 11,357 Sales and marketing 5,679 5,379 10,805 9,926 General and administrative 2,337 1,384 3,735 2,671 Operating income 20,399 22,247 41,917 42,485 Other income (expense), net (60) 268 (6) 554 Income before income taxes 20,339 22,515 41,911 43,039 Provision for income taxes 3,914 3,750 7,930 3,769 Net income $16,425 $18,765 $33,981 $39,270 Earnings per share: Basic $2.20 $2.50 $4.56 $5.23 Diluted $2.20 $2.48 $4.54 $5.19 Weighted average shares outstanding: Basic 7,451 7,505 7,454 7,509 Diluted 7,473 7,555 7,479 7,561 COMPREHENSIVE INCOME STATEMENTS (In millions) (Unaudited) Three Months Ended Six Months Ended December 31, December 31, 2022 2021 2022 2021 Net income $16,425 $18,765 $33,981 $39,270 Other comprehensive income (loss), net of tax: Net change related to derivatives (32) 0 (25) 2 Net change related to investments 348 (743) (1,549) (1,165) Translation adjustments and other 570 (103) (205) (222) Other comprehensive income (loss) 886 (846) (1,779) (1,385) Comprehensive income $17,311 $17,919 $32,202 $37,885 BALANCE SHEETS (In millions) (Unaudited) December 31, June 30, 2022 2022 Assets Current assets: Cash and cash equivalents $15,646 $13,931 Short-term investments 83,862 90,826 Total cash, cash equivalents, and short-term investments 99,508 104,757 Accounts receivable, net of allowance for doubtful accounts of $485 and $633 35,833 44,261 Inventories 2,980 3,742 Other current assets 19,502 16,924 Total current assets 157,823 169,684 Property and equipment, net of accumulated depreciation of $63,459 and $59,660 82,755 74,398 Operating lease right-of-use assets 13,624 13,148 Equity investments 7,097 6,891 Goodwill 67,905 67,524 Intangible assets, net 10,354 11,298 Other long-term assets 24,994 21,897 Total assets $364,552 $364,840 Liabilities and stockholders' equity Current liabilities: Accounts payable $15,354 $19,000 Current portion of long-term debt 3,997 2,749 Accrued compensation 9,030 10,661 Short-term income taxes 3,553 4,067 Short-term unearned revenue 36,982 45,538 Other current liabilities 12,802 13,067 Total current liabilities 81,718 95,082 Long-term debt 44,119 47,032 Long-term income taxes 24,169 26,069 Long-term unearned revenue 2,644 2,870 Deferred income taxes 289 230 Operating lease liabilities 11,998 11,489 Other long-term liabilities 16,479 15,526 Total liabilities 181,416 198,298 Commitments and contingencies Stockholders' equity: Common stock and paid-in capital - shares authorized 24,000; outstanding 7,447 and 7,464 90,225 86,939 Retained earnings 99,368 84,281 Accumulated other comprehensive loss (6,457) (4,678) Total stockholders' equity 183,136 166,542 Total liabilities and stockholders' equity $364,552 $364,840 CASH FLOWS STATEMENTS (In millions) (Unaudited) Three Months Ended Six Months Ended December 31, December 31, 2022 2021 2022 2021 Operations Net income $16,425 $18,765 $33,981 $39,270 Adjustments to reconcile net income to net cash from operations: Depreciation, amortization, and other 3,648 3,496 6,438 6,708 Stock-based compensation expense 2,538 1,897 4,730 3,599 Net recognized losses (gains) on investments and derivatives 214 (307) 192 (671) Deferred income taxes (1,305) 183 (2,496) (5,787) Changes in operating assets and liabilities: Accounts receivable (3,164) (5,543) 8,565 4,943 Inventories 1,305 394 762 (383) Other current assets (392) 830 (724) 1,770 Other long-term assets (65) (908) (731) (1,506) Accounts payable (2,058) 235 (3,625) (236) Unearned revenue (5,186) (4,343) (8,508) (7,228) Income taxes (2,863) (2,057) (2,453) 596 Other current liabilities 1,819 1,745 (2,205) (2,398) Other long-term liabilities 257 93 445 343 Net cash from operations 11,173 14,480 34,371 39,020 Financing Repayments of debt (750) 0 (1,750) (4,826) Common stock issued 243 291 818 903 Common stock repurchased (5,459) (7,433) (11,032) (15,117) Common stock cash dividends paid (5,066) (4,652) (9,687) (8,858) Other, net (317) (192) (581) (364) Net cash used in financing (11,349) (11,986) (22,232) (28,262) Investing Additions to property and equipment (6,274) (5,865) (12,557) (11,675) Acquisition of companies, net of cash acquired, and purchases of intangible and other assets (679) (850) (1,028) (2,056) Purchases of investments (11,599) (2,505) (16,612) (12,814) Maturities of investments 6,928 5,253 13,590 14,115 Sales of investments 4,775 2,895 7,486 8,525 Other, net (301) (89) (1,161) (506) Net cash used in investing (7,150) (1,161) (10,282) (4,411) Effect of foreign exchange rates on cash and cash equivalents 88 106 (142) 33 Net change in cash and cash equivalents (7,238) 1,439 1,715 6,380 Cash and cash equivalents, beginning of period 22,884 19,165 13,931 14,224 Cash and cash equivalents, end of period $15,646 $20,604 $15,646 $20,604 SEGMENT REVENUE AND OPERATING INCOME (In millions) (Unaudited) Three Months Ended Six Months Ended December 31, December 31, 2022 2021 2022 2021 Revenue Productivity and Business Processes $17,002 $15,936 $33,467 $30,975 Intelligent Cloud 21,508 18,262 41,833 35,174 More Personal Computing 14,237 17,530 27,569 30,896 Total $52,747 $51,728 $102,869 $97,045 Operating Income Productivity and Business Processes $8,175 $7,688 $16,498 $15,269 Intelligent Cloud 8,904 8,323 17,882 16,004 More Personal Computing 3,320 6,236 7,537 11,212 Total $20,399 $22,247 $41,917 $42,485 We have recast certain prior period amounts to conform to the way we internally manage and monitor our business. IMPORTANT NOTICE TO USERS (summary only, click here for full text of notice); All information is unaudited unless otherwise noted or accompanied by an audit opinion and is subject to the more comprehensive information contained in our SEC reports and filings. We do not endorse third-party information. All information speaks as of the last fiscal quarter or year for which we have filed a Form 10-K or 10-Q, or for historical information the date or period expressly indicated in or with such information. We undertake no duty to update the information. Forward-looking statements are subject to risks and uncertainties described in our Forms 10-Q and 10-K. 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