December 9, 2020 9:30 AM - PT. Server Products and Services is the most significant revenue source ($41.4bn) and also the one with fast growth (27%). endobj Dec 02, 2020 ... Microsoft Fiscal Year 2021 Second Quarter Earnings Conference Call; Satya Nadella, CEO and Amy Hood, EVP & CFO. One of the new tools is Teams, Microsoft’s business communication tool, and another one is a business intelligence tool Power BI. The same infrastructure, for example, is what Sony has decided to use as well and be on Azure as well as use our AI capabilities.”. The area charts below show how are different Microsoft revenue streams important for Microsoft’s revenue and what are the trends during the last five years. Tesla Annual Report 2020 Form 10-K (NASDAQ:TSLA) Published: April 28th, 2020 PDF generated by stocklight.com . *The upcoming earnings date is derived from an algorithm based on a company's historical reporting dates. Informed by over 8 trillion daily security signals and observations from our security and threat intelligence experts, our new Digital Defense Report presents telemetry and insights about the current state of cybersecurity. Research & Development expenses are staying roughly at a 13% share. This includes products like Windows Server and SQL server, which are mostly on-premise solutions or part of hybrid solutions. If you look at revenue for devices for the last five years, it is the worst-performing part, but the recent few years offer some good news. /CA 1.0 The third most significant revenue contributor was Windows trailed by LinkedIn, a business that Microsoft acquired at the end of 2016 (2017 fiscal year) for $27bn. Service revenue mainly came from sales of its own and third-party games (Microsoft takes a cut from the price), and it was partially offset by a decrease from the sale of Xbox hardware. That is good news and means the operating margin increased to 37%, which is very respectful, and it would be even higher if we did not count loss-making LinkedIn revenue and expenses. Crown jewel, however, is fast-growing Azure cloud. All those software products that tens of thousands of software engineers are working on do not show there. The aim is to provide you with a rough idea of what company we are talking about. Free cash flow is one of the most important metrics that show the cash that the company can generate and is one of the core inputs (the adjusted version) into how companies are valued. It is not a cornerstone of Microsoft’s business anymore, but it is still crucial as part of its full business software offerings. $100 invested on 6/30/15 in stock or index, including reinvestment of dividends. Windows’ importance for Microsoft revenue is slowly decreasing, and Windows currently has a 16% share on total revenue. In this latest release, the Law Enforcement Requests Report and the U.S. National Security Orders Report covering … Microsoft also offers in its financial statements a split of its margin across different high-level segments. The biggest piece of Windows revenue is coming from Equipment manufactures (OEM) like Lenovo, Dell, or HP that offer devices with a preinstalled Windows operating system. The LinkedIn acquisition was sold to investors by Microsoft as a significant opportunity for synergies between the companies. And since the LinkedIn acquisition was finance by debt, you can see a significant increase in long-term debt, which is Microsoft slowly repaying each year. The second biggest part of Microsoft’s business based on revenue are server products and services. Just have a look and explore the chart below. These are both consumer-focused devices and business-focused devices. To do that, I use information company itself provided. It is a strategic asset because of its underlying search technology. /Subtype /Image By deducting investment into property and equipment, we arrive at $45bn of free cash flow. Free cash flow is one of the most crucial cash flow metrics, showing how much cash can Microsoft generate. Overview of Amazon’s business through analysis of Amazon’s annual report and its financial statements. Below the takeaway, you will find variety of visualizations of the income statement, cash flow statement, and balance sheet that you can explore. I will cover both the income statement and key things from the balance sheet and cash flow statements. h t m) It is a smaller part of Windows revenue (24%) but growing in double digits. /AIS false It includes revenue from providing premier support of its products and consulting and training on how to best use Microsoft’s products. The Annual Microsoft Vulnerabilities Report. But getting its money back does not justify the reasoning behind this acquisition. Long term negative trend is caused mainly by Phone business revenue evaporation in 2015 and partly in 2016 when Microsoft exited its phone business. Traditional server products are still an essential revenue stream and even growing very slowly each year. But let’s be clear that part of this growth is thanks to customers switching from on-premise licensing to Office 365 and also by customers with cheaper Office 365 subscriptions switching to more expensive packages to have access to more premium tools. If you want to dig deeper into the history of Microsoft, then this Wikipedia article should cover you well. << So What Business is Microsoft in, and where does its revenue come from? So as you can see, although CEO did not confirmed or denied anything, as I see it, he suggested that there are synergies with Azure cloud and that having Microsoft’s gaming services running on Azure can be used to lure other businesses in the gaming sector into Azure. Another stream of Windows revenue is Commercial Licensing, where companies buy Windows licenses directly from Microsoft. It is currently tiny but fits company strategy very well. Even though people used LinkedIn more, companies used LinkedIn less to seek employees, which meant slower growth. Income statements, balance sheets, cash flow statements and key ratios. Our 2019 Diversity and Inclusion Report is our most comprehensive to date, and reflects our data, our journey, our learnings, and our employees’ stories. Microsoft earned $143bn in revenue in 2020, which was an annual growth of 14%. If there is an issue with inconsistency with older years, I try to adjust earlier financial statements to make data more consistent. The chart below shows the same expense item we explored before as % of revenue for the last five years. So, if you think about what we are doing with X Cloud, it’s a hero workload on top of Azure. 8 . Microsoft likes to mention Office 365 high growth in its presentations and conference calls quite often. My aim is to show you the numbers simply and visually, but mainly tie the numbers to the “business” behind the numbers. With examples and comparison of their strengths and weaknesses. /Producer (�� Q t 4 . The balance sheet of a technology & software company like Microsoft is usually straightforward. Webcast. Microsoft went through several bad years. It might look that Microsoft does not need any introduction since everybody has heard of it. The problem was that its strategy for how it plans to become relevant in the new age was quite unclear. Microsoft's Annual Income Statement, MSFT as of Jun 30 2020 - CSIMarket Another synergy that was mention and that I see as a viable opportunity is an integration of LinkedIn Learning content into Office. Microsoft returned $7.9 billion to shareholders in the form of dividends and share repurchases in the first quarter of fiscal year 2020, an increase of 28% compared to the first quarter of fiscal year 2019. /BitsPerComponent 8 And all segments margin increased versus 2020. LinkedIn is also the reason behind the increase in Goodwill since around 60% of the price paid for LinkedIn was actually premium above market value. DOWNLOAD NOW. Microsoft Online Subscription Agreements are designed for small and medium organizations that want to subscribe to, activate, provision, and maintain cloud services seamlessly and directly via the web. It is not so much visible in previous revenue breakdowns because this shift is happening within the several main revenue sources. Microsoft business. {Շ���o�e9�K���A��. Microsoft is one of the world’s most valuable companies, and its 2020 financial results are record-breaking again. But the data also highlight areas where we need to redouble our efforts. 3 0 obj To sum up, LinkedIn is not a bad acquisition even with its current performance, but some synergies that were announced as a reason for the acquisition did not happen yet, even thoug it looks the things are moving in the right direction. We can also spot big changes in the balance sheet structure in 2017 (fiscal year) as Microsoft acquired LinkedIn for $27bn. The Annual Microsoft Vulnerabilities Report The 2020 Microsoft Vulnerabilities Report compiles every Microsoft security bulletin from the past 12 months, analyzes … This temporary increase was mainly caused by LinkedIn as it was incorporated into the result for the full year. On the other hand, legacy on-premise business is in decline. Microsoft’s revenue increased by $17.2bn in 2020 (14% growth), and around 40% of this increase came from Azure and another 20% from Office for commercial customers. If we look under the hood and compare how Commercial Office 365 is growing versus its traditional on-premise Office licensing, we see two different businesses. %PDF-1.4 It is crucial for Microsoft to have this expertise and continue to innovate in it inside Microsoft to be able to push search and understanding of natural language into its business-focused products. Here you can have a video version of Microsoft journey made by the Wall Street Journal. More recently we have seen the news that Microsoft is interested into acquisition of popular social app TikTok. Microsoft annual revenue for 2019 was $125.843B, a 14.03% increase from 2018. Since 2017 devices consist predominantly of revenue from Surface devices. When comparing Microsoft Cloud business to AWS or Google’s Cloud, it is often too narrowly focused only on Azure because it is easily comparable to AWS. The chart below offers a look at total revenue development and detailed revenue streams for the last five years. What Business is Microsoft In? The results were in-line with the update the company provided on April 21, 2020, which detailed the impact of the COVID-19 pandemic on its operations and financials. What this chart also shows is the white area at the top, which is revenue that is not spent. To Satya Nadella’s credit, he is quite open about it, as shown in the following video clip. However, revenue is not the main problem LinkedIn has, because it is probably still losing around $1bn a year in operating income. 2020 Annual Report Template Word will help you present and add value to your business. ANNOUNCEMENT NO. On the other hand, we also have two smaller, fast-growing revenue sources on the right, which are LinkedIn and Other (mostly Dynamics). Today, I’m sharing the progress we’re making toward our goal to increase diversity at Microsoft globally. If you aren’t satisfied with the level of detail, don’t worry, we will soon get to it in the following part of the article. If you can check Microsoft’s presentation on the LinkedIn deal, you will see that it contains a lot of vague corporate “mumbo jumbo” reasons, but between them, one can spot few “realistic” integration opportunities. But the story is not over yet, and it looks that things are poised to get even better for Microsoft. It comes fully editable, allowing you to implement brand identity and customize the report according to your data. Microsoft is quite focused on educational tools both for non-business and business-focused, and the future of learning will be connected with gaming technology. These OEM partners pay the licensing fee to Microsoft for that. But it will be a slow process and it will take years before we see some of them bringing significant revenue. Microsoft annual revenue for 2020 was $143.015B, a 13.65% increase from 2019. Below is financial information derived from the audited consolidated financial statements. It shows the maturity of Microsoft’s business, where it can self finance its investment activity and still return a hefty amount to investors. LinkedIn was acquired at the end of the 2016 calendar year, but it falls into the 2017 fiscal year that ends in June 2017. Microsoft 2020 annual EPS was $5.76, a 13.83% increase from 2019. Their unifying theme is that they are all focused on business customers. Commercial Office 365 currently makes up the majority of Office revenue and is growing very quickly (24% in 2020). In March 2020, the World Health Organization declared the outbreak of COVID-19 to be a pandemic. Data source for the above visuals and tables is Microsoft’s annual report (K-10) that the company submits to the Security and Exchange Commission (SEC) and also other documents that Microsoft provided for investors. Since then, the company has significantly increased its … Its operating margin is high across different segments. Disclaimer: Although I use third party trademarks and logos in this article and its visuals, kamilfranek.com is an independent site, and there is no relationship, sponsorship, or endorsement between this site and the owners of those trademarks. This breakdown divides Microsoft’s business into three segments that can be further broken down into product groups in the following way: Although the high-level grouping makes some sense, at least for the first two segments, I prefer to jump directly into individual product revenue streams, where you can see what is happening. Growth is in line with revenue (14%) and has increased significantly in the last three years, in line with total revenue growth. Note About Forward-Looking Statements. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended June 30, 2020 OR Xbox is a pretty significant business with $11.6bn of annual revenue, but its growth is on a lower side and increased by $0.2bn in 2020, which resulted from an 11% increase in services part of gaming revenue. Two revenue sources mentioned above make together more than 60% of Microsoft revenue. /Height 103 /Creator (�� w k h t m l t o p d f 0 . Before we leave the cash flow statement, let me breakdown also investing cash flow. We can split it into products or services or if it is coming from the US or other countries. I will explain what is going on using custom charts and will summarize key takeaways for you. Let’s dig deeper into each item of the revenue individually. Although Bing, which is Microsoft’s search engine, market share is tiny, and Microsoft even outsourced monetization of Search to Verizon, it still added nice $8bn to revenue in 2020. Revenues continued to grow as it did for the last several years, and in the 2020 fiscal year, Microsoft achieved record revenue of $143bn (14% annual growth). If you really want a more proper number about how much “free” cash Microsoft has after investing, we need to adjust free cash flow for investing done through leasing. Microsoft today reported fiscal Q4 2020 earnings, including revenue of $38.0 billion, net income of $11.2 billion, and earnings per share of $1.46. Switching to Office 365 also means higher pricing and therefore contributes to revenue growth. However, the majority of OEM Windows revenue is from devices with Windows Professional installed. endobj Not much to see there, the split is 50:50 and does not change much. Let’s dig deeper into Microsoft’s revenue breakdown. DOWNLOAD NOW. stream In the second place are Office products and services. Thanks to this combination, it was the single biggest absolute revenue growth reason in 2020. The answer is simple. The level of detail that companies offer for expenses are usually much less granular than for revenue. Microsoft 10Q quarterly report filed 2020-09-30. When looking at Microsoft’s number, please note that Microsoft’s fiscal year does not end in December, but in June. Its growth is slower than the average revenue growth. Microsoft Corp (MSFT) SEC Filing 10-K Annual report for the fiscal year ending Tuesday, June 30, 2020 Microsoft Office Products and Services include a growing number of tools. The total cost of revenue is growing by 7%, which is below the revenue growth. Ten years of annual and quarterly financial statements and annual report data for Microsoft (MSFT). What drives the overall operating margin increase is lower growth in all expenses except Research & Development. If we do all these adjustments Microsoft Free Cash Flow would be $34bn in 2020 and not $45bn. We can see the cost of revenue for services and R&D are items that are growing roughly at the same speed as revenue. ANNOUNCEMENT NO. Investors expect this trend to continue for some time, and then it is no surprise that Microsoft stock price just shot up at the same time and currently is competing with Amazon and Apple for the title of the most valuable company in the world. •Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after we electronically file that material with or furnish it to the Securities and Exchange Commission (“SEC”) at www.sec.gov. In case you are new to my posts about companies and visualizations, I published post “7 Best Charts for Income Statement Presentation & Analysis”, where I explain most of the financial statements visualizations that I use here. 5) These reports include Financial Statements such as Income Statements, Cash Flow Statements, Balance Sheets, and more investor related information ... 2020 Annual Report. And Microsoft is no exception. We can see that Microsoft was “saving” around $13bn to $14bn each year and increasing its cash pile, which ended in 2018. With infographics, visuals, and revenue estimates for different Android business models. Intelligent Cloud operating margin is 38%. Microsoft annual revenue for 2018 was $110.36B, a 14.28% increase from 2017. /Type /XObject Some of them are updated versions of classics like Outlook, Excel, Word, or PowerPoint, but some are new products that Microsoft did not have before and which got customers’ attention. To be able to keep paying out money to shareholders and keep its current cash pile and even increase it, Microsoft needed to borrow money to finance the LinkedIn acquisition. It was perceived as a surprising and questionable move, and the jury is still out on if this acquisition will deliver what was promissed. The company made a hard decision to leave smartphone business (and effectively consumer business) behind and refocus entirely on its business-focused productivity & server software. For the fifth year in a row, data trends continue in the right direction in both the broader Microsoft business and in our core . The key thing to realize is that Microsoft is not a consumer company anymore (except its gaming division). Microsoft 2019 annual EPS was $5.06, a 137.56% increase from 2018. If we add it up, then you can see from $45bn of free cash flow, $38bn was paid back to shareholders. Therefore revenue for 2019 of $126bn is revenue from July 2018 to June 2019. The third important revenue source, but less than it used to be, is Windows, with a 16% share on Microsoft’s revenue. VIEW ONLINE . 1 0 obj (In the graph above it is included within “Other” category). The operating margin of Microsoft is increasing for the last couple of years, and in 2020 was at respectful 37% of revenues. Microsoft today published its latest series of biannual transparency reports on the Microsoft Transparency Hub.These reports consist of the Law Enforcement Requests Report and the U.S. National Security Orders Report, as well as the Content Removal Requests Report.. In 2018 (vs. 2017), Microsoft provided a similar explanation that sales and marketing expenses are driven not only by commercial sales but also thanks to LinkedIn (full-year impact of acquisition)that was offset by decreasing marketing expenses. The cloud version of Dynamics (Dynamics 365) generates $1.5bn in annual revenue and grows by over 40% a year. It only shows investments in the physical part of its cloud infrastructure as part of the property and equipment category, which is the less valuable part of Microsoft’s business. The reason behind this growth is not only the number of business users but also the increase in average price when customers migrate to more expensive subscriptions. In fiscal Q4 2020, Microsoft reported $13.4 billion in revenue from Intelligent Cloud, a 17% increase over the same quarter last year. 4 0 obj Key learnings in 2020. The overall growth of expenses is 9%, which is lower than 14% revenue growth. Together with Office revenue source is the core driver of Microsoft’s recent success. /CreationDate (D:20200801181617Z) Form 10-K Microsoft Corp Annual report [Section 13 and 15(d), not S-K Item 405] SEC.report. 2020 ANNUAL REPORT. Traditional on-premise server products are the biggest part of this category (around $21 bn annually) and are still growing, although very slowly. Microsoft’s net income increase by $5bn compared to last year, continuing with a stable increase as both revenue and operating margin increase. Another not so much a takeaway then just a reminder is that Windows, although not anymore cornerstone of. To keep the growth at 11%, conversion of Office 365 customers to higher subscriptions would have to accelerate, or user growth would have to increase, or Microsoft would have to raise prices of Office 365. Founded in 1975, Microsoft (Nasdaq “MSFT” @microsoft) is the leading platform and productivity company for the mobile-first, cloud-first world, and its mission is to empower every person and every organization on the planet to achieve more. Ten years of annual and quarterly financial statements and annual report data for Microsoft (MSFT). In this part of the article, you can find a visual summary of key metrics from Microsoft’s financial statements and also key takeaways from them. Before we jump into financial results from annual financial statements, let me give you a quick overview of what business Microsoft is in and what are its biggest revenue sources. These are not limited just to traditional Excel, Word, and PowerPoint. 2020 Annual Report Template Word. endobj 2019 ANNUAL REPORT. These are not a significant driver of profits nowadays, but it might change in a couple of years. The recent announcement that Microsoft wants to buy TikTok suggests that this might be the case. Everything that visualization above shows below the Free Cash Flow part is about how Microsoft spends its free cash flow. What happened there? Azure is Microsoft’s cloud service, which is the second-biggest cloud after Amazon’s AWS. The biggest from these other smaller streams are Gaming with an 8% share on revenue and Search (5% of revenue). This cost category deserves our attention because although it increases its growth to 13% increase in 2018, it slowed down again in 2019 and 2020. Unfortunately, detail to see the split between different functional categories for the segments is not provided anymore. VIEW ONLINE. And if other business needs arise in the future, that can be solved by a software tool or cloud service; I bet Microsoft will come after it. The agreement allows customers to acquire monthly or annual subscriptions for cloud-based services. In March 2020, the World Health Organization declared the outbreak of COVID-19 to be a pandemic. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A (Amendment No. Still, this growth is more than offset by lower growth in Sales and Marketing and lower growth in the cost of revenue for products. Microsoft also reports gross and operating margin for these three operating segments, which allows us to deduce the total cost of revenue and total expenses for each segment. Still, a balance sheet is important to look at, even in the case of Microsoft, but we won’t spend too much time with it. You can find them on Microsoft’s investor relation website, including conference call recordings and their transcripts. Visualization in the form of bubble chart below offers a summary of how different expense items are changing in 2020 compared to 2019. The article offers charts & key takeaways for the ... Overview of the seven best charts for income statement (P&L) presentation and analysis. Headcount grew between 6%-5% both in 2018, 2019 and 2020. This report makes it clear that threat actors have rapidly increased in sophistication over the past year, using techniques that make them harder to spot and that threaten even the savviest targets. The chart below shows how different balance sheet items moved in 2020, both absolutely and relatively. So although, sales and marketing expenses in 2018 were temporarily impacted by LinkedIn, general trend is that sales & marketing expenses are growing more slowly because it combines growth in a commercial sales capacity (roughly in line with headcount growth), and this growth is partially offset by other items. Microsoft’s story is about once a dominant company that ruled in the PC era and later got under pressure as consumers shifted from PC to smartphones. It took some time, for sure, but looking back, the last couple of years were hugely successful for Microsoft in terms of financial performance and its stock price. When Microsoft’s CEO, Satya Nadella, was asked about the future of Gaming within Microsoft during the 2019 Q4 earnings call, this was his answer: (Note: X Cloud is Microsoft gaming streaming service). DUBLIN, May 21, 2020 (GLOBE NEWSWIRE) -- Medtronic plc (NYSE:MDT) today announced financial results for its fourth quarter and fiscal year 2020, which ended April 24, 2020. It can be seen as Microsoft’s answer to Salesforce.com and other similar software as a service platforms. We can also see that in 2017 it paid about $26bn for acquisitions, which is mainly LinkedIn. We can see above that from $61bn, part of it ($15bn) was used to invest in property and equipment. /SMask /None>> The question is why. These are investments mainly into Microsoft’s data centers, hardware for these data centers, and partially also for office space for its ever-growing workforce. You can also see how Microsoft splits its revenue based on if it is coming from the US or other countries. Form 10-K Microsoft Corp Annual report [Section 13 and 15(d), not S-K Item 405] SEC.report. Apart from the important revenue streams mentioned above, Microsoft also has a few smaller business-focused offerings for hiring and learning (LinkedIn) or CRM (Dynamics 365). Gaming for now looks like a weird fit, and its future is unclear. I will meet you below the chart, and we will look at each product revenue stream individually. Microsoft Annual Reports. OEM Licensing with Windows Professional is growing by around 11% annually compared with usually declining revenue from non-Professional OEM Windows licensing. On the right, you can find a difference in $ and growth rate versus the previous year. But to compare these two clouds this way kind of misses the point where Microsoft’s cloud business is heading. 2017 ANNUAL REPORT. >> 1 2 . Moreover, new cloud-based competitors emerged that threatened Microsoft’s business software dominance. /SM 0.02 Chart also shows us the fastest-growing source of Microsoft’s revenue. As I showed earlier, the cost of revenue for prouducts and the cost of revenue for services are moving in different directions as services are usually new faster-growing income streams compared to “legacy” products. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended June 30, 2020 OR But the truth is that Microsoft’s business changed significantly in the last six years. Azure is a Microsoft real success story with revenue of around $20bn a year and fast growth. If you take into account that Q4 was very positively affected by COVID-19, not much to brag about. But thanks to its size, Office absolute revenue increases is a significant contributor to the total Microsoft’s revenue increase this year. Overall it looks that Microsoft is smart in how it invests its money back into high growth areas and keeps overhead under control. Our global health response team is acting to help protect our employees in accordance with global health authorities’ guidance. Only around $5bn in 2020 came from the consumer version of office products (mostly Office 365). Current CEO Satya Nadella that replaced Steve Ballmer as CEO in 2014 deserves a lot of credit for how Microsoft managed to focus on Cloud solutions, including Azure and execute this strategy effectively. Founded in 1975, Microsoft (Nasdaq “MSFT” @microsoft) is the leading platform and productivity company for the mobile-first, cloud-first world, and its mission is to empower every person and every organization on the planet to achieve more. Microsoft revenue for the twelve months ending September 30, 2020 was $147.114B, a 13.33% increase year-over-year. Is it used to strengthen Microsoft’s already impressive cash pile, repay debt, or to pay out to shareholders? It is growing at a stable rate of around 10% for the last few years. So, when we think about capital allocation, what’s happening in the cloud, what’s happening in the edge, how with build the network to optimize for streaming. To sum up, it looks that Microsoft is doing great overall with Office and 11% annual growth is a good achievement, given its already big market presence. However, the core revenue breakdown that offers the biggest detail and understanding of how Microsoft makes money is its operating segment breakdown, which should be in line with how Microsoft looks at its business internally.