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microsoft annual report 2020

11 Jan 2021, Posted by in Allgemein

REDMOND, Wash. — Dec. 2, 2020 — Speaking to shareholders at Microsoft Corp.’s annual meeting on Wednesday, Chief Executive Officer Satya Nadella outlined Microsoft’s opportunity and responsibility: to help its customers and partners thrive in a world where every company is a technology company and to create technology that benefits everyone on the planet, including […] To keep the growth at 11%, conversion of Office 365 customers to higher subscriptions would have to accelerate, or user growth would have to increase, or Microsoft would have to raise prices of Office 365. Some of them are updated versions of classics like Outlook, Excel, Word, or PowerPoint, but some are new products that Microsoft did not have before and which got customers’ attention. Microsoft revenue for the twelve months ending September 30, 2020 was $147.114B, a 13.33% increase year-over-year. Moreover, new cloud-based competitors emerged that threatened Microsoft’s business software dominance. Before we leave the cash flow statement, let me breakdown also investing cash flow. Before we jump into financial results from annual financial statements, let me give you a quick overview of what business Microsoft is in and what are its biggest revenue sources. According to its annual report for fiscal year 2015, Microsoft had long-term debt of $17.9 billion. And if you want a current free cash flow to estimate future one, you also need to adjust for stock-compensation. Microsoft earned $143bn in revenue in 2020, which was an annual growth of 14%. It used to be the biggest part of Microsoft revenue until 2018. How did it develop thorough the last five years? Income statements, balance sheets, cash flow statements and key ratios. Service revenue mainly came from sales of its own and third-party games (Microsoft takes a cut from the price), and it was partially offset by a decrease from the sale of Xbox hardware. Long term negative trend is caused mainly by Phone business revenue evaporation in 2015 and partly in 2016 when Microsoft exited its phone business. Microsoft likes to mention Office 365 high growth in its presentations and conference calls quite often. But let’s be clear that part of this growth is thanks to customers switching from on-premise licensing to Office 365 and also by customers with cheaper Office 365 subscriptions switching to more expensive packages to have access to more premium tools. We can also see that in 2017 it paid about $26bn for acquisitions, which is mainly LinkedIn. The overall growth of expenses is 9%, which is lower than 14% revenue growth. Dynamics offers business customers different modules for enterprise resource planning (ERP) or Customer Relationship Management (CRM). So What Business is Microsoft in, and where does its revenue come from? Just be aware that this is a “standard” way and not so great one how to calculate “Free Cash Flow”. Microsoft also offers in its financial statements a split of its margin across different high-level segments. And if other business needs arise in the future, that can be solved by a software tool or cloud service; I bet Microsoft will come after it. It might look that Microsoft does not need any introduction since everybody has heard of it. The key thing to realize is that Microsoft is not a consumer company anymore (except its gaming division). It includes revenue from providing premier support of its products and consulting and training on how to best use Microsoft’s products. We can split it into products or services or if it is coming from the US or other countries. Note: Growth in LinkedIn revenue between 2018 and 2017 is not comparable because the 2017 value is only for half of the year. /Producer (�� Q t 4 . Microsoft was pushing and working on Azure and also Office 365 even during Ballmer tenure (Satya Nadella managed Azure as a vice president). It includes both traditional on-premise Microsoft Server and Microsoft SQL Server and also the modern Azure cloud. Accounting approaches how to treat revenues or recognize assets change in time, and companies only offer two or three years of consistent data. December 9, 2020 9:30 AM - PT. /Length 9 0 R The issue was not primarily in company profits at the time, as it was able to keep making money from its legacy products. Investors expect this trend to continue for some time, and then it is no surprise that Microsoft stock price just shot up at the same time and currently is competing with Amazon and Apple for the title of the most valuable company in the world. /ca 1.0 described in our 2019 Diversity & Inclusion report. You can also see how Microsoft splits its revenue based on if it is coming from the US or other countries. Still, a balance sheet is important to look at, even in the case of Microsoft, but we won’t spend too much time with it. >> And Microsoft is no exception. Here you can have a video version of Microsoft journey made by the Wall Street Journal. Microsoft acquired LinkedIn in the 2017 fiscal year (end of the 2016 calendar year) for a whopping $27bn. Microsoft 2020 annual EPS was $5.76, a 13.83% increase from 2019. Even though people used LinkedIn more, companies used LinkedIn less to seek employees, which meant slower growth. In March 2020, the World Health Organization declared the outbreak of COVID-19 to be a pandemic. The problem was that its strategy for how it plans to become relevant in the new age was quite unclear. Firstly, let’s clarify that the vast majority of Office revenue is coming from commercial customers. Let’s compare sales and marketing expenses growth with headcount growth in sales & marketing. If you can check Microsoft’s presentation on the LinkedIn deal, you will see that it contains a lot of vague corporate “mumbo jumbo” reasons, but between them, one can spot few “realistic” integration opportunities. Let’s dig deeper into Microsoft’s revenue breakdown. In the second place are Office products and services. h t m) On the right, you can find a difference in $ and growth rate versus the previous year. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended June 30, 2020 OR Just have a look and explore the chart below. Detailed breakdown of how Google makes money from Android. Cash flow is especially important for observing the company’s investing activity, how much free cash flow it has after investing, and how this free cash flow is used. I was writing about this opportunity already last year and it looks that it will become real soon since it was specifically mentioned on 2020 Q4 earnings call. REDMOND, Wash. — Feb. 26, 2020 — As Microsoft closely monitors the impact of the COVID-19 health emergency, our top priority remains the health and safety of our employees, customers, partners, and communities. In 2018 (vs. 2017), Microsoft provided a similar explanation that sales and marketing expenses are driven not only by commercial sales but also thanks to LinkedIn (full-year impact of acquisition)that was offset by decreasing marketing expenses. /SM 0.02 Not bad for a company that also has large legacy product lines with slow growth rates. << LinkedIn is also the reason behind the increase in Goodwill since around 60% of the price paid for LinkedIn was actually premium above market value. Free cash flow is one of the most crucial cash flow metrics, showing how much cash can Microsoft generate. But the data also highlight areas where we need to redouble our efforts. Gaming (Xbox) is the only solely consumer-focused business that might look out of place considering Microsoft’s new business focus strategy. And higher value leads to higher profit margins. The Office also includes a note-taking tool (OneNote), communication tools (Microsoft Teams, Skype), or business intelligence tools (Power BI). Data source for the above visuals and tables is Microsoft’s annual report (K-10) that the company submits to the Security and Exchange Commission (SEC) and also other documents that Microsoft provided for investors. So, if you think about what we are doing with X Cloud, it’s a hero workload on top of Azure. If the company did not provide it, I show the historical years as they were reported. With Microsoft behind LinkedIn and keeping its current momentum, Microsoft should be able to get its money back. In 2020, Microsoft commissioned Hypothesis Group, an insights, design, and strategy agency, to execute the IoT Signals Edition 2 resear...  IoT Signals is the annual report designed to better serve our partners and customers, as well as help business leaders develop their own IoT … Windows’ importance for Microsoft revenue is slowly decreasing, and Windows currently has a 16% share on total revenue. Still, this growth is more than offset by lower growth in Sales and Marketing and lower growth in the cost of revenue for products. Below the takeaway, you will find variety of visualizations of the income statement, cash flow statement, and balance sheet that you can explore. $100 invested on 6/30/15 in stock or index, including reinvestment of dividends. However, the majority of OEM Windows revenue is from devices with Windows Professional installed. /ColorSpace /DeviceGray *The upcoming earnings date is derived from an algorithm based on a company's historical reporting dates. Traditional server products are still an essential revenue stream and even growing very slowly each year. In line with its focus on commercial & productivity tools, the recent announcement by Microsoft that it is closing Microsoft Store physical locations should not be a surprise. The 2020 Microsoft Vulnerabilities Report compiles every Microsoft security bulletin from the past 12 months, analyzes the trends, and includes viewpoints from security experts. This development can drive the growth of revenue for a while at current levels, but after the legacy portfolio gets converted into Office 365, growth will slow down unless Microsoft takes some action. So how are these different parts developing? It is currently tiny but fits company strategy very well. It can be seen as Microsoft’s answer to Salesforce.com and other similar software as a service platforms. Another synergy that was mention and that I see as a viable opportunity is an integration of LinkedIn Learning content into Office. Today, Microsoft is releasing a new annual report, called the Microsoft Digital Defense Report, covering cybersecurity trends from the past year. x��{|W��}�\$��MB��kHH����*V��(�.m����J�zS]t[�*J۠D�KJWP� ��HMD�H�.����2s�sf��;�����������3s�w�̹�a&�ĬLM���J�$�Q�w�]�GVe_UK�ni|�-�����U�4���W����[_uK�ni|�-�����U�4��,����㡓������ی�tcڱc������bV_ה�3ɹ��~/��٩��^��/�����H8f��B�R�|}���úY}��5���]#���S��'��il��"��i�zBL� �K��l*��\O����׹��� ��v\ơUD�dԇl���,��\JJ����|w��w{J�ے�#� ���(�4CI�����.�_��k���2F�$S ���C`f��js��*�_�{���#^ It is a strategic asset because of its underlying search technology. stream VIEW ONLINE. It offers a different perspective because it focuses on cash flow when it happened and not when it was recognized as revenue or expense. It is not a cornerstone of Microsoft’s business anymore, but it is still crucial as part of its full business software offerings. Another not so much a takeaway then just a reminder is that Windows, although not anymore cornerstone of. It is only over 2 minutes but gives you the main idea. On the other hand, legacy on-premise business is in decline. To Satya Nadella’s credit, he is quite open about it, as shown in the following video clip. Everything that visualization above shows below the Free Cash Flow part is about how Microsoft spends its free cash flow. Some of Microsoft’s announcements might seem supporting the idea that Microsoft is trying to get get back to a consumer market. DOWNLOAD NOW. Everything culminated by the questionable acquisition of another struggling company that once dominated its market. Bing, however, is not important only because it earns a few billions of dollars from advertising. 5) Azure is an extremely fast-growing business, growing by 72% in 2019, and 56% in 2020, and it is poised to overcome on-premise server products in revenue next year. Founded in 1975, Microsoft (Nasdaq “MSFT” @microsoft) is the leading platform and productivity company for the mobile-first, cloud-first world, and its mission is to empower every person and every organization on the planet to achieve more. Microsoft business. Products are usually legacy products that Microsoft doesn’t develop so actively, and company resources are shifting to services. Microsoft Annual Reports. Past Events. Not much to see there, the split is 50:50 and does not change much. With examples and comparison of their strengths and weaknesses. 2018 ANNUAL REPORT. Let’s look at the individual items closer, focusing on the ones that are not growing in line with revenues. I can also think of one other long term reason why gaming in Microsoft fits its strategy well. All those software products that tens of thousands of software engineers are working on do not show there. This report makes it clear that threat actors have rapidly increased in sophistication over the past year, using techniques that make them harder to spot and that threaten even the savviest targets. Below is financial information derived from the audited consolidated financial statements. Microsoft EPS for the twelve months ending September 30, 2020 was $6.20, a 16.98% increase year-over-year. Microsoft annual revenue for 2018 was $110.36B, a 14.28% increase from 2017. This looks like a real value proposition for businesses that can make money, and integrating it with Office 365 can give Office even more customer stickiness. Overall it looks that Microsoft is smart in how it invests its money back into high growth areas and keeps overhead under control. For the fifth year in a row, data trends continue in the right direction in both the broader Microsoft business and in our core . The Annual Microsoft Vulnerabilities Report The 2020 Microsoft Vulnerabilities Report compiles every Microsoft security bulletin from the past 12 months, analyzes … To sum up, it looks that Microsoft is doing great overall with Office and 11% annual growth is a good achievement, given its already big market presence. In this latest release, the Law Enforcement Requests Report and the U.S. National Security Orders Report covering … Since then, the company has significantly increased its … Microsoft also reports gross and operating margin for these three operating segments, which allows us to deduce the total cost of revenue and total expenses for each segment. So as you can see, although CEO did not confirmed or denied anything, as I see it, he suggested that there are synergies with Azure cloud and that having Microsoft’s gaming services running on Azure can be used to lure other businesses in the gaming sector into Azure. The chart below shows Microsoft’s balance sheet in US dollars during the last five years, and below it, you can find a similar chart showing the relative size of different balance sheet items as % of total assets. Microsoft annual revenue for 2019 was $125.843B, a 14.03% increase from 2018. Chart also shows us the fastest-growing source of Microsoft’s revenue. 8 . Microsoft went through several bad years. So although, sales and marketing expenses in 2018 were temporarily impacted by LinkedIn, general trend is that sales & marketing expenses are growing more slowly because it combines growth in a commercial sales capacity (roughly in line with headcount growth), and this growth is partially offset by other items. Nokia’s acquisition sort of marks the low point for Microsoft, but since then, Microsoft was able to pull itself together. By deducting investment into property and equipment, we arrive at $45bn of free cash flow. This breakdown divides Microsoft’s business into three segments that can be further broken down into product groups in the following way: Although the high-level grouping makes some sense, at least for the first two segments, I prefer to jump directly into individual product revenue streams, where you can see what is happening. Disclaimer: Although I use third party trademarks and logos in this article and its visuals, kamilfranek.com is an independent site, and there is no relationship, sponsorship, or endorsement between this site and the owners of those trademarks. /CA 1.0 If you really want a more proper number about how much “free” cash Microsoft has after investing, we need to adjust free cash flow for investing done through leasing. Visualization in the form of bubble chart below offers a summary of how different expense items are changing in 2020 compared to 2019. The recent announcement that Microsoft wants to buy TikTok suggests that this might be the case. Microsoft Corporation Annual Report 2020 Form 10-K (NASDAQ:MSFT) Published: July 31st, 2020 PDF generated by stocklight.com . UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A (Amendment No. But thanks to its size, Office absolute revenue increases is a significant contributor to the total Microsoft’s revenue increase this year. We can then see a bunch of low growth revenue sources on the bottom left, including Windows, Gaming, Search, and others. Note About Forward-Looking Statements. This template was created in Adobe InDesign and Microsoft Word. Worldwide, Microsoft employees […] 1 0 obj Details above are the most detailed split of revenue that Microsoft provides. So we can safely ignore this consumer piece as immaterial and concentrate on commercial customers. That should be enough for a quick overview of what Microsoft’s business is. Nowadays, the main focus of Microsoft is software and cloud-based services for business, that can be divided into these areas: Business productivity: It is represented mainly by Microsoft Office, which offers a wide variety of office tools. The third important revenue source, but less than it used to be, is Windows, with a 16% share on Microsoft’s revenue. If we want to analyze Microsoft properly, we cannot skip looking at its cash flow statement. Form 10-K Microsoft Corp Annual report [Section 13 and 15(d), not S-K Item 405] SEC.report. Informed by over 8 trillion daily security signals and observations from our security and threat intelligence experts, our new Digital Defense Report presents telemetry and insights about the current state of cybersecurity. To be able to keep paying out money to shareholders and keep its current cash pile and even increase it, Microsoft needed to borrow money to finance the LinkedIn acquisition. 1 2 . >> It is a smaller part of Windows revenue (24%) but growing in double digits. It only shows investments in the physical part of its cloud infrastructure as part of the property and equipment category, which is the less valuable part of Microsoft’s business. If we look under the hood and compare how Commercial Office 365 is growing versus its traditional on-premise Office licensing, we see two different businesses. In this part of the article, you can find a visual summary of key metrics from Microsoft’s financial statements and also key takeaways from them. Form 10-K Microsoft Corp Annual report [Section 13 and 15(d), not S-K Item 405] SEC.report. “A new learning app in Teams will allow organizations to integrate LinkedIn Learning, as well as their own content, to create a continuous feedback loop between work, skills, and the learning to upskill and reskill employees.”, — Satya Nadella, Microsoft’s CEO, Q4 2020 Earnings Call. Microsoft 2019 annual EPS was $5.06, a 137.56% increase from 2018. Ten years of annual and quarterly financial statements and annual report data for Microsoft (MSFT). Microsoft Online Subscription Agreements are designed for small and medium organizations that want to subscribe to, activate, provision, and maintain cloud services seamlessly and directly via the web. VIEW ONLINE. This report makes it clear that threat actors have rapidly increased in sophistication over the past year, using techniques that make them harder to spot and that threaten even the savviest targets. We can also spot big changes in the balance sheet structure in 2017 (fiscal year) as Microsoft acquired LinkedIn for $27bn. Microsoft is one of the world’s most valuable companies, and its 2020 financial results are record-breaking again. It should give you a good idea about which segment/product lines provide the most significant piece of Microsoft’s revenue, which is the fastest-growing in dollar amount and percentage growth. In fiscal Q4 2020, Microsoft reported $13.4 billion in revenue from Intelligent Cloud, a 17% increase over the same quarter last year. Two revenue sources mentioned above make together more than 60% of Microsoft revenue. It might be one of the significant opportunities for revenue growth years ahead. In this article, I will walk you through Microsoft’s financial statements from its annual report. If there is an issue with inconsistency with older years, I try to adjust earlier financial statements to make data more consistent. The main reason for this increase was continued investment in cloud engineering and also in LinkedIn and devices. However, revenue is not the main problem LinkedIn has, because it is probably still losing around $1bn a year in operating income. On the other hand, we also have two smaller, fast-growing revenue sources on the right, which are LinkedIn and Other (mostly Dynamics). It is not so much visible in previous revenue breakdowns because this shift is happening within the several main revenue sources. Webcast. /Creator (�� w k h t m l t o p d f 0 . It will allow companies to create a custom learning plan that can be built from external content that LinkedIn hosts or can be structured as a combination of external content and internally created content. What happened there? Microsoft’s financial statement offers three different ways of how we can break down its revenues. It was perceived as a surprising and questionable move, and the jury is still out on if this acquisition will deliver what was promissed. If we look at cash flow for the last five years, we can see that operating cash flow is growing every year, and even though Microsoft invests more money each ear into its data centers and offices, it still can increase its free cash flow. The chart above shows that the three main ways how Microsoft earns revenue come from: These together make up more than three-quarters of Microsoft’s revenues. My aim is to show you the numbers simply and visually, but mainly tie the numbers to the “business” behind the numbers. Microsoft annual revenue for 2020 was $143.015B, a 13.65% increase from 2019. Free cash flow is one of the most important metrics that show the cash that the company can generate and is one of the core inputs (the adjusted version) into how companies are valued. It is growing at a stable rate of around 10% for the last few years.

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