Microsoft Corp., an American multinational technology conglomerate, is currently the second largest company in terms of market capitalization, trailing behind Apple Inc. On October 24th, after the market closes, Microsoft will report its financial results for the first quarter of FY24.
Microsoft generates its revenues from three main segments. The first segment is the Productivity and Business Processes segment, which includes products and services such as Office Commercial, Office Consumer, LinkedIn, and Dynamic Business Solutions. The second segment is the Intelligent Cloud segment, which includes various Server Products and Cloud Services, as well as Enterprise Services. The third segment is the More Personal Computing segment, which involves Windows, Devices, Gaming, Search, and News Advertising. The Intelligent Cloud segment has been the highest revenue-generating segment for Microsoft in the past four years. In FY 2023, the segment generated $87.91 billion in sales revenue, accounting for over 40% of the total revenue. Despite macroeconomic difficulties, Microsoft’s annual revenue for FY 2023 reached over $211 billion, up nearly 6.9% from the previous year. A decade ago, its total revenue was around $78 billion.
In the previous quarter, the Intelligent Cloud segment contributed the most to Microsoft’s revenue, generating $23.99 billion, a 14.7% increase compared to the previous year. The Productivity and Business Processes segment and the More Personal Computing segment generated $18.29 billion (10.2% increase) and $13.91 billion (3.2% decrease due to declining sales in Windows OEM and devices), respectively.
Operating income for the Intelligent Cloud segment increased by over 19% year-on-year to $10.53 billion, while the Productivity and Business Processes segment saw a 25% increase to $9.05 billion. The More Personal Computing segment had a slight increase of over 4% to $4.68 billion. Net income for the quarter was $20.1 billion, a 20% increase compared to the same period last year.
In addition, Microsoft has announced its acquisition deal with Activision Blizzard worth $68.7 billion, which would make it the third largest gaming company by revenue. This deal would potentially lead to more Activision Blizzard games being added to Xbox Game Pass, improving Microsoft’s competitiveness in the gaming market.
Microsoft’s gaming revenue in the previous quarter increased by 1% compared to the prior year period. The Xbox content and services revenue alone saw a 5% increase, driven by growth in third-party content and Xbox Game Pass. However, Xbox hardware revenue declined by 13% quarter-on-quarter due to softer demand for Xbox Series S/X consoles.
Consensus estimates for Microsoft’s sales revenue in the upcoming announcement are around $55.0 billion, slightly lower than the previous quarter but up over 9% from the same period last year. Analysts expect the earnings per share (EPS) to be $2.59, a decrease of 10 cents from the previous quarter.
Technical analysis indicates that Microsoft’s stock price experienced bullish momentum in the first half of 2023, reaching an all-time high. However, the momentum began to wane in mid-July. Last week, the company’s share price closed bearish just above a support level at $320.50. Breaking this level may lead to further testing of recent lows at $309.43 and $297.50.
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