Microsoft Corp. (MSFT), a global technology giant renowned for its diverse range of products, including personal computing devices, cloud systems and services, software, and various other offerings, continues to establish its presence in the tech industry. As a major competitor, Microsoft engages in a wide array of sectors, competing against notable companies such as Apple Inc. (AAPL), Amazon.com Inc. (MZN), International Business Machines Corp. (IBM), and Oracle Corp. (ORCL).
The worth of a company is typically measured by its market capitalization, which is determined by multiplying the current stock price by the number of shares outstanding. As of May 25, 2023, Microsoft’s net worth stands at an impressive $2.475 trillion.
This valuation places Microsoft in an exclusive league, as only one other company, Apple, has achieved such a remarkable level of worth. A significant factor contributing to Microsoft’s soaring net worth is its exceptional performance in the field of cloud computing.
Here’s the breakdown of Microsoft net worth (for the quarter ended March 2023):
Name: | Microsoft Corp. (MSFT) |
Net Worth: | $2.475T |
Annual Revenue: | $207.591B |
Total Assets: | $380.088B |
Total Liabilities | $185.405B |
Table of Contents
Overview of Microsoft Financials in Q3 2023
According to Microsoft’s announcement, the company experienced positive financial performance in the third quarter of 2023, with revenue increasing by $3.5 billion or 7%. This growth was primarily driven by the Intelligent Cloud and Productivity and Business Processes segments, although it was partially offset by a decline in the More Personal Computing segment.
The company’s gross margin also increased by $3.0 billion or 9%, while operating income saw a rise of $2.0 billion or 10%. However, foreign currency fluctuations had a mixed impact on the financial results, with revenue, gross margin, and operating income being adversely affected, while cost of revenue and operating expenses benefited from favorable currency movements.
Revenue Growth
Microsoft’s revenue showed strong growth, increasing by $3.5 billion or 7% during the third quarter of 2023. This expansion was primarily driven by the Intelligent Cloud and Productivity and Business Processes segments. The Intelligent Cloud segment experienced notable growth, primarily fueled by Azure and other cloud services. Moreover, the Productivity and Business Processes segment saw revenue growth driven by Office 365 Commercial.
However, the More Personal Computing segment experienced a decline in revenue, driven by decreased sales of Windows and Devices.
Cost of Revenue
The cost of revenue for Microsoft increased by $513 million or 3% during Q3 2023. This increase was primarily due to growth in the Microsoft Cloud segment, partially offset by a reduction in depreciation expenses resulting from a change in accounting estimate for the useful lives of the company’s server and network equipment.
Gross Margin
Microsoft’s gross margin experienced a significant increase of $3.0 billion or 9% during the third quarter of 2023. This growth was driven by the Intelligent Cloud and Productivity and Business Processes segments, as well as the aforementioned change in accounting estimate.
However, the More Personal Computing segment witnessed a decline in gross margin. Excluding the impact of the accounting estimate change, the gross margin percentage slightly decreased, primarily due to reductions in the Intelligent Cloud segment, partially offset by a sales mix shift.
Furthermore, the gross margin percentage for Microsoft Cloud increased by 2 points, reaching 72%. However, excluding the impact of the accounting estimate change, the Microsoft Cloud gross margin percentage slightly decreased, mainly driven by reductions in Azure and other cloud services.
Operating Expenses
Operating expenses for Microsoft increased by $996 million or 7% in Q3 2023. This rise was primarily driven by 2 points of growth from the Nuance and Xandr acquisitions, as well as investments in cloud engineering and LinkedIn.
- Research and Development Expenses: Research and development expenses increased by $678 million or 11% during the third quarter. This growth was primarily driven by investments in cloud engineering and LinkedIn.
- Sales and Marketing Expenses: Sales and marketing expenses increased by $155 million or 3%, with 3 points of growth attributed to the Nuance and Xandr acquisitions and investments in commercial sales. However, this increase was partially offset by declines in Windows and Devices advertising.
- General and Administrative Expenses: General and administrative expenses increased by $163 million or 11% during the third quarter. This growth was driven by acquisition-related expenses and investments in corporate functions. Additionally, general and administrative expenses included a favorable foreign currency impact of 2%.
| Operating Expenses | Amount Increased (Millions) | Percentage Increase |
|---|---|---|
| Research and Development | $678 | 11% |
| Sales and Marketing | $155 | 3% |
| General and Administrative | $163 | 11% |
Operating Income
Microsoft’s operating income witnessed a notable increase of $2.0 billion or 10% in Q3 2023. This growth was primarily driven by the Productivity and Business Processes and Intelligent Cloud segments, as well as the change in accounting estimate. However, the More Personal Computing segment experienced a decline in operating income.
Impact of Foreign Currency
Foreign currency fluctuations had both favorable and unfavorable impacts on Microsoft’s financials in the third quarter of 2023. Revenue, gross margin, and operating income were adversely affected by a 3%, 4%, and 5% unfavorable foreign currency impact, respectively. However, cost of revenue and operating expenses benefited from a favorable foreign currency impact of 2%.
The Bottom Line
Overall, Microsoft demonstrated strong revenue growth, driven by the Intelligent Cloud and Productivity and Business Processes segments. Despite the decline in More Personal Computing, the company’s gross margin and operating income experienced significant increases. However, foreign currency fluctuations had mixed effects on the financial results.
