Executive Summary
In Q2 2024, Microsoft Corporation (MSFT) reported record revenue of $62 billion, reflecting an 18% increase year-over-year (YoY). The strategic integration of artificial intelligence across Microsoft's offerings, particularly in its Azure and Office segments, has driven this growth, with a notable 24% increase in Microsoft Cloud revenues, which reached $33.7 billion. Operating income grew 25% YoY, indicating improved operational efficiency amid ongoing investments in AI and cloud technologies. Management highlighted continued momentum across all business segments, with particularly strong performance in Azure AI services, further solidifying Microsoft's competitive position in the rapidly evolving tech landscape.
Key Performance Indicators
Key Insights
**Revenue Performance:** Microsoft's total revenue stood at **$62 billion**, marking an **18% YoY increase** and a **9.74% QoQ increase**.
**Operating Income:** Operating income reached **$27.03 billion** with an operating margin of **44%**, up from the prior year's margin, reflecting disciplined cost control despite increased investment in growth areas.
**Net Income:** The net income reported was **$21.87 billion**, resulting in an EPS of **$2.93**, which represents a **33.64% incr...
Financial Highlights
Revenue Performance: Microsoft's total revenue stood at $62 billion, marking an 18% YoY increase and a 9.74% QoQ increase.
Operating Income: Operating income reached $27.03 billion with an operating margin of 44%, up from the prior year's margin, reflecting disciplined cost control despite increased investment in growth areas.
Net Income: The net income reported was $21.87 billion, resulting in an EPS of $2.93, which represents a 33.64% increase YoY.
Gross Profit Margin: The gross profit margin stood at 68%, slightly improved from the previous year, illustrating efficient cost management amidst rising operational complexities.
Cash Flow and Investment: Cash flow from operations was $18.9 billion, a substantial 69% increase YoY, and free cash flow was $9.1 billion, up 86% YoY, underscoring Microsoft's strong financial health and ability to reinvest in growth opportunities.
Current Ratio: At 1.22, Microsoft maintains a healthy liquidity position, ensuring its capacity to cover short-term liabilities.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
62.02B |
17.58% |
9.74% |
| Gross Profit |
42.40B |
20.24% |
5.43% |
| Operating Income |
27.03B |
32.52% |
0.51% |
| Net Income |
21.87B |
33.15% |
-1.89% |
| EPS |
2.94 |
33.64% |
-2.00% |
Key Financial Ratios
operatingProfitMargin
43.6%
operatingCashFlowPerShare
$2.54
freeCashFlowPerShare
$1.23
dividendPayoutRatio
25.5%
Management Commentary
Strategic AI Focus: Satya Nadella emphasized, 'We’ve moved from talking about AI to applying AI at scale by infusing AI across every layer of our tech stack, we are winning new customers and helping drive new benefits and productivity gains.' This underscores management's commitment to integrating AI, particularly within Azure, which saw a growth of 30% driven by AI services.
Acquisition Impact: Amy Hood noted the challenges associated with the Activision acquisition, stating, 'Activision contributed approximately 4 points to revenue growth, was a 2 point drag on adjusted operating income growth.' This illustrates both the potential and the integration challenges coming from recent strategic expansions.
'It was a record quarter driven by the continued strength of Microsoft Cloud, which surpassed $33 billion in revenue, up 24%.' – Satya Nadella
— Satya Nadella
'Results exceeded expectations and we delivered another quarter of double-digit top and bottom-line growth.' – Amy Hood
— Amy Hood
Forward Guidance
Management provided a positive outlook, projecting revenue growth in Microsoft Cloud to remain robust, with anticipated revenue for Q3 2024 between **$26 to $26.3 billion**, indicating continued growth momentum driven by Azure services and AI-related solutions. The focus on operational efficiencies and disciplined cost management is expected to contribute positively to operating margins, even as AI investments increase operating costs.