Microsoft’s second-quarter net profit of $11.6 billion, up 38% year-on-year

Microsoft today released its second quarter 2020 report for the year ended December 31, 2019. On a year-earlier basis, Microsoft’s second-quarter revenue was $36.906 billion, up 14 percent from $32.471 billion a year earlier, and net profit was $11.649 billion, up 38 percent from $8.42 billion a year earlier, according to the results.

Microsoft's second-quarter net profit of $11.6 billion, up 38% year-on-year

Screenshot of Microsoft share price

Microsoft shares were up $2.58 at $168.04 at $168.04 at the close of trading on Wednesday. Microsoft shares rose $4.14, or 2.46 percent, to $172.18. Microsoft’s share price has fluctuated from $102.35 to $168.74 in the past 52 weeks.

Microsoft’s Q2 Key Financial Data

Revenue: Microsoft’s second-quarter revenue was $36.906 billion, up 14% from $32.471 billion a year earlier.

Net income: Net income was $11.649 billion, up 38 percent from $8.42 billion a year earlier, and diluted earnings per share were $1.51, up 40 percent from $1.08 a year earlier.

Operating profit: Based on GAAP, operating profit was $13.891 billion, up 35% from 102.58 a year earlier.

Revenue cost: Total revenue costs were $12.358 billion, down from $12.423 billion a year earlier. Among them, product revenue costs were $4.966 billion, down from $5.855 billion a year earlier, while services and other revenue costs were $7.392 billion, up from $6.538 billion a year earlier.

Gross profit: Microsoft’s second-quarter gross profit was $24.548 billion, up from $20,048 million a year earlier.

Research and development expenditure: $4.603 billion, up from $4,070 million a year earlier, sales and marketing expenditure at $4,933 million, up from $4,588 million a year earlier, and general and administrative expenditure at $1.121 billion, down from $1.132 billion a year earlier.

Microsoft's second-quarter net profit of $11.6 billion, up 38% year-on-yearMicrosoft's second-quarter net profit of $11.6 billion, up 38% year-on-year

Business highlights:

Revenue from the Productivity and Business Process business unit was $11.8 billion, up 17% year-on-year (up 19% at constant exchange rates), with the following key business performance:

Revenue from Office 365 Business, driven by a 27 per cent increase (up 30 per cent at a constant rate), increased revenue by 16 per cent (18 per cent at a constant rate).

Revenue from Office consumer products and cloud services grew 19 percent (20 percent at constant exchange rates) and Office 365 consumer subscribers grew to 37.2 million.

LinkedIn revenue rose 24 per cent (26 per cent at constant exchange rates).

Dynamics products and cloud services revenue grew 12 per cent (15 per cent at constant exchange rates) driven by a 42 per cent increase in revenue from Dynamics 365 products (up 45 per cent at constant exchange rates).

Revenue from the Smart Cloud business was $11.9 billion, up 27% year-on-year (28% at constant exchange rates), with business highlights as follows:

Revenue for server products and cloud services grew 30% (32% at constant exchange rates), driven by a 62% increase in Azure revenue (up 64%) at constant exchange rates.

Revenue for corporate services grew 6% year-on-year (up 7% at constant exchange rates).

Revenue is more personal calculation business, with revenue of $13.2 billion, up 2% year-on-year (up 3% at constant exchange rates), with business highlights as follows:

Windows OEM revenue increased 18% (18% at constant exchange rates),

Windows business and cloud services revenue increased by 25% (27% at constant exchange rates).

Surface revenue up 6% (up 8% at constant exchange rate)

Search advertising revenue, excluding traffic acquisition costs, increased by 6% (up 7% at constant exchange rates).

Xbox gaming revenue fell 11 per cent (down 9 per cent at a constant exchange rate).

Shareholder returns

Microsoft returned $8.5 billion to shareholders in the second quarter of fiscal 2020 in the form of share buybacks and dividends.

Executive Reviews

“Microsoft is innovating at all levels of the differentiated technology stack and is leading the way in key legacy areas that are critical to the success of our customers. Satya NaDELLa, Microsoft’s chief executive, said, “As opportunities continue to grow, we are working to ensure that the technologies Microsoft develops are inclusive, trustworthy, and committed to creating a more sustainable world that benefits everyone and every organization.” “

“The strong execution of our sales team and our partners has pushed revenue from commercial cloud services to $12.5 billion, up 39 percent from a year earlier,” said Amy Hood, Microsoft’s executive vice president and chief financial officer. “