Microsoft Beats The Street: Net Income Up 51 Percent, Office Revenue Up 15 Percent

Microsoft just released better than expected Q1 earnings, posting first-quarter revenue of $16.2 billion, an 25% increase from the same period of the prior year. Analysts expected revenue to come in at $15.8 billion. Operating income, net income and diluted earnings per share for the quarter were $7.12 billion, $5.41 billion and $0.62 per share, which represented increases of 59%, 51% and 55%, respectively, when compared with the prior year period. Analysts were expecting diluted earnings per share of $0.55.

Microsoft said that the company saw year-over-year growth across all business segments. Revenue from Office 2010 grew over 15% in its first full quarter in market. The entertainment division saw strong growth as Xbox 360 console sales increased by 38%. The biggest growth came from Windows, with revenue up 66% to $4.8 billion. Windows operating profits up 124% to $3.2 billion (from $1.5 billion last year) and Windows Azure subscriptions grew by 40%.

Revenue from online business, which includes Bing, didn’t see quite as big of an uptick. Sales were up 8%, with online advertising up 13% for the quarter. Unfortunately, Microsoft reported that online business still lost $560 million in operating income.

Peter Klein, chief financial officer at Microsoft said in a statement: “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…Our ability to grow revenue while continuing to control costs allowed us to deliver another quarter of year-over-year margin expansion.”

We’ve embedded the slides and a table with segment revenues and operating profits below.

Microsoft Corporation
Segment Revenue and Operating Income   (Loss)
(In millions)(Unaudited)
Three Months Ended
September 30,
2010 2009
Windows & Windows Live Division $4,785 $2,880
Server and Tools 3,959 3,550
Online Services Division 527 487
Microsoft Business Division 5,126 4,514
Entertainment and Devices Division 1,795 1,412
Unallocated and other 3 77
Consolidated $16,195 $12,920
Operating income (loss)
Windows & Windows Live Division $3,323 $1,483
Server and Tools 1,630 1,237
Online Services Division (560) (477)
Microsoft Business Division 3,388 2,827
Entertainment and Devices Division 382 260
Corporate-level activity (1,047) (848)
Consolidated $7,116 $4,482