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Microsoft: Revenue growth reaccelerates powered by the Cloud
Microsoft $MSFT FY23 Q3 Earnings Analysis

Executive Summary

  • Productivity and Business Processes revenue grew by 11% due to strong growth in Office commercial and Dynamics, as well as positive momentum in Microsoft 365 subscriptions and LinkedIn revenue. The company is seeing strong adoption of its AI-powered business applications, including Dynamics 365 Copilot and Cloud for Sustainability, while Teams and LinkedIn continue to gain market share and record engagement levels.

  • Intelligent Cloud revenue increased 16% driven by Azure and cloud services, with growing demand for security solutions indicated by the enterprise mobility and security installed base. While on-premises server business faced challenges, demand for hybrid offerings was positive. Azure is gaining market share with major customers like OpenAI, NVIDIA, Unilever, and IKEA Retail using its powerful AI infrastructure to train large models. Azure OpenAI Service has attracted over 2,500 customers representing a 10x increase quarter-over-quarter.

  • More Personal Computing revenue declined by 9% due to lower Windows OEM and Devices revenue. However, there was strong renewal execution leading to better-than-expected PC demand in the commercial segment. Search and news advertising revenue grew due to increased search volume and share gains for Edge browser and Bing. Over 90% of the Fortune 500 have either trialed or deployed Windows 11, and Bing has over 100 million daily active users. The gaming division achieved record numbers of monthly active users and devices, with subscription revenue reaching almost $1 billion.

  • Management anticipates 10-12% revenue growth ($17.9 to $18.2 billion) in Q3 2023 for Productivity and Business Processes, driven by Office 365, Microsoft 365 subscriptions, LinkedIn Talent Solutions, and Dynamics 365. In the Intelligent Cloud segment, 15-16% revenue growth ($23.6 to $23.9 billion) is expected, led by Azure and Microsoft 365 suite. More Personal Computing may decline by 4-7% ($13.35 to $13.75 billion), with Windows OEM and Devices revenue declining partially offset by growth in Search and News Advertising and Xbox content and services revenue.

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Microsoft: Revenue growth reaccelerates powered by the Cloud
Microsoft (MSFT) FY23 Q3 Earnings Analysis
Microsoft: Revenue growth reaccelerates powered by the Cloud

Jazzi Young's avatar
Jazzi Young
@jazziyoungApril 26
Your full analysis is really well structured, making it a very good read.
I'm surprised how well LinkedIn is doing.
Solid company. Definitely a stalwart of the software industry.
Wolf of Harcourt Street's avatar
Wolf of Harcourt Street
@wolfofharcourtApril 27Author
@jazziyoung Cheers Jazzi appreciate the feedback, the structure of my writing is something I have been refining. LinkedIn is mind blowing. Almost at 1 billion users and 5x revenue since it was purchased
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