Microsoft reported record fiscal first-quarter revenues on Thursday, with strong demand for Office, Windows 7, and the Xbox driving a 51 percent increase in profits.
Microsoft reported net income of $5.41 billion on revenue of $16.20 billion for the quarter ended Sept. 30. That represented a 51 percent increase in profits, and a 25 percent jump in revenue from the same period a year ago. Microsoft said its year-ago results included the deferral of $1.47 billion of revenue due to its Windows 7 upgrade option.
Sales to small- and medium-business customers were up over 30 percent, partially aided by a 15 percent boost in the number of customers selling Microsoft products.
“We see customers of all sizes leveraging cloud services from Microsoft,” chief financial officer Peter Klein said on the call, reiterating the cloud focus that Microsoft had emphasized at its Professional Developers’ Conference.
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The company said that Office 2010 revenue was up 15 percent over previous Office revenue in its first full quarter of sales. Xbox sales grew by 38 percent to 2.8 million units, and Bing also continued its market-share expansion.
More importantly, the company said that it “continues to see a healthy and sustaining business PC refresh cycle,” a contrast to a gloomy outlook for the PC microprocessor market, which could have a negative impact on PC sales.
Microsoft saw PC sales grow at between 9 and 11 percent, with business PC growth in the mid-teens. PC growth in emerging markets, unsurprisingly, was stronger than in mature markets.
“This was an exceptional quarter, combining solid enterprise growth and continued strong consumer demand for Office 2010, Windows 7, and Xbox 360 consoles and games,” said Peter Klein, chief financial officer at Microsoft, in a statement. “Our ability to grow revenue while continuing to control costs allowed us to deliver another quarter of year-over-year margin expansion.”
Microsoft reported revenue of $4.79 billion for the Windows and Windows Live division, versus $4.35 billion for the same period a year ago, with the Windows 7 deferral revenue factored in. Without it, Microsoft reported $2.88 billion for the period. The business reported $3.3 billion in operating income, more than double that of a year ago.
Microsoft said it sold over 240 million Windows 7 licenses to date.
Microsoft’s Server and Tools business reported $1.63 billion in operating income on $3.96 billion in revenue.
Microsoft’s Business Division reported $3.9 billion in operating income versus $5.13 billion in revenue, a 14 percent jump in revenue, with double-digit growth for SharePoint, Lync, Dynamics CRM, and Exchange. And Microsoft’s Online Services Division reported $530 million in revenue, an 8 percent increase. However, Online Services reported an operating loss of $560 million, versus an operating loss of $477 million a year ago.
Microsoft’s Entertainment and Devices Division, the home of the Xbox, reported $1.80 billion in revenue, up 27 percent from a year ago. The division reported $382 million in operating income, and “Halo:Reach generated $350 million in revenue.
Microsoft’s outlook for its Windows business is to be in line with PC market growth excluding the Windows 7 launch spike of about $600 million, the company said; for its business division, Microsoft expects non-annuity revenue in line with PC market growth, and multi-year license revenue to grow in the mid- to high single digits.