Microsoft Office, Windows, and cloud boosts Q1 2022 earnings

Microsoft today announced the first quarter 2022 financial results. It reported revenue of $45.3 billion, and net income of $20.5 million (GAAP). The revenue is up 22% and the net income has increased by 48%. This quarter, Microsoft saw strong revenue performance across its cloud, server and office businesses.
Although Microsoft may have just released Windows 11 earlier in the month, sales of PCs in the US have been declining for months due to supply problems.

However, this doesn't appear to have had an impact on Microsoft's Windows revenues. Microsoft claims that Windows OEM revenue rose by 10% this quarter despite the fact that there is still a lot of PC demand, as Microsoft says.

Microsoft 365 has helped increase the revenue from cloud services and commercial products for Windows by 12 percent. Windows 11 was only released on new devices this month. Microsoft and OEMs are hoping that supply problems improve and that the new operating systems drives more demand for PCs and laptops.

Surface sales are now in the second quarter for Surface Laptop 4 (and Surface Pro 7 Plus) and Microsoft's Surface revenues. Surface revenue decreased by 17% this quarter. Microsoft claims that it is due to a stronger previous year.

Since the Xbox Series X consoles and Series S consoles were launched in December 2013, it has been almost a year. In recent months, Microsoft has been steadily increasing hardware revenue. Due to the continued demand for Xbox Series X consoles and Series S, hardware revenue rose by 166 percent this quarter.

Microsoft's total gaming revenue has also increased by 16 percent to nearly $3.6 billion in the quarter. This is a record Q1 for Xbox. However, Xbox content and services revenues have only increased by 2 percentage points. Microsoft claims that Xbox Game Pass subscriptions have seen some growth, but it is not releasing a new number for subscribers. In January 2021, 18 million Xbox Game Pass subscribers were publicly reported.

Microsoft's cloud growth has been impressive, especially as hybrid work is becoming more common. The revenue from intelligent cloud has increased 31 percent over the past year, with Azure and other cloud service revenue growth of 50%.

Office also enjoyed a strong quarter with cloud services revenue and Office consumer products up 10 percent and Microsoft 365 subscribers up 19% to 54.1 millions.

Microsoft's business editions of Office and the associated cloud services have also seen an 18% increase in revenue over the past year. Office 365 commercial revenue has seen a 23 percent increase. You might be wondering if businesses are shifting to the cloud. Office commercial products revenue fell 13 percent in the past year due to the shift to cloud services.

Although Microsoft's core business segments still have a healthy revenue balance, the intelligent cloud business is slowly losing ground. Around 33 percent of Microsoft's revenues come from Productivity and Business Processes. This includes Office, LinkedIn and Dynamics. Intelligent Cloud now accounts for 38 percent of Microsoft's revenue. It includes Auzre and server products as well as cloud services. This leaves More Personal Computing with 29 percent of Microsoft's total revenue.

Microsoft will hold an investor conference at 2:30 PM PT/ 5:30 PM ET. We will update this article with any comments or information.

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