It is not so much visible in previous revenue breakdowns because this shift is happening within the several main revenue sources. /SM 0.02 On the right, you can find a difference in $ and growth rate versus the previous year. If there is an issue with inconsistency with older years, I try to adjust earlier financial statements to make data more consistent. This temporary increase was mainly caused by LinkedIn as it was incorporated into the result for the full year. We can see that Microsoft was “saving” around $13bn to $14bn each year and increasing its cash pile, which ended in 2018. 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. Form 10-K Microsoft Corp Annual report [Section 13 and 15(d), not S-K Item 405] SEC.report. /Type /ExtGState We can see above that from $61bn, part of it ($15bn) was used to invest in property and equipment. Not so relevant, small cost category, but it is good to see that Microsoft can keep its growth at low levels. These reports include Financial Statements such as Income Statements, Cash Flow Statements, Balance Sheets, and more investor related information ... 2020 Annual Report. The overall growth of expenses is 9%, which is lower than 14% revenue growth. But it will be a slow process and it will take years before we see some of them bringing significant revenue. The LinkedIn acquisition was sold to investors by Microsoft as a significant opportunity for synergies between the companies. Microsoft annual revenue for 2019 was $125.843B, a 14.03% increase from 2018. OEM Licensing with Windows Professional is growing by around 11% annually compared with usually declining revenue from non-Professional OEM Windows licensing. But things did not look so well just a few years ago. It took some time, for sure, but looking back, the last couple of years were hugely successful for Microsoft in terms of financial performance and its stock price. 2019 ANNUAL REPORT. “… it builds on the rest of the cloud investment. Financials. /ca 1.0 It is a smaller, slow-growing revenue stream but which fits nicely within the Microsoft business model. Here you can have a video version of Microsoft journey made by the Wall Street Journal. Since then, the company has significantly increased its … 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. All those software products that tens of thousands of software engineers are working on do not show there. Chart also shows us the fastest-growing source of Microsoft’s revenue. If we add it up, then you can see from $45bn of free cash flow, $38bn was paid back to shareholders. Microsoft earned $143bn in revenue in 2020, which was an annual growth of 14%. Since 2017 devices consist predominantly of revenue from Surface devices. It offers a different perspective because it focuses on cash flow when it happened and not when it was recognized as revenue or expense. I will cover both the income statement and key things from the balance sheet and cash flow statements. Revenues continued to grow as it did for the last several years, and in the 2020 fiscal year, Microsoft achieved record revenue of $143bn (14% annual growth). By the way, it is roughly the same as the total revenue of LinkedIn that Microsoft paid $27bn for. Microsoft is quite focused on educational tools both for non-business and business-focused, and the future of learning will be connected with gaming technology. 2018 ANNUAL REPORT. Detailed breakdown of how Google News makes money with infographics, visuals and revenue estimates for different business models of Google News. Microsoft went through several bad years. The biggest from these other smaller streams are Gaming with an 8% share on revenue and Search (5% of revenue). The cost of revenue for services is growing by 13% compared to the cost of revenue for product growth of -2%. Announcements. This part already happened a can help differentiate Dynamics 365 on the market (More about Dynamic later). This makes absolute sense, given the revenue split development between products and services and transformation Microsoft is going through. Commercial Office 365 currently makes up the majority of Office revenue and is growing very quickly (24% in 2020). {Շ���o�e9�K���A��. These OEM partners pay the licensing fee to Microsoft for that. 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. ANNOUNCEMENT NO. 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. Microsoft Office Products and Services include a growing number of tools. 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 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. Its operating margin is high across different segments. The key thing to realize is that Microsoft is not a consumer company anymore (except its gaming division). With infographics, visuals, and revenue estimates for different Android business models. So What Business is Microsoft in, and where does its revenue come from? It is a smaller part of Windows revenue (24%) but growing in double digits. 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. Not bad for a company that also has large legacy product lines with slow growth rates. The problem was that its strategy for how it plans to become relevant in the new age was quite unclear. In case you are new to my posts about companies and visualizations, I published post “7 Best Charts for Income Statement Presentation & Analysis”, where I explain most of the financial statements visualizations that I use here. Unfortunately, it does not show the main part of the business, which is the value of the intellectual property it internally develops. If we want to analyze Microsoft properly, we cannot skip looking at its cash flow statement. Microsoft offers a wide variety of software products and cloud services. 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. ���j,yBQŹ��V@ M�ׯ�}���? But getting its money back does not justify the reasoning behind this acquisition. You can find them on Microsoft’s investor relation website, including conference call recordings and their transcripts. Therefore revenue for 2019 of $126bn is revenue from July 2018 to June 2019. Yes, it offers Windows and Office productivity tools to individual consumers too, but the consumer market is no longer the focus of the company. We can also spot big changes in the balance sheet structure in 2017 (fiscal year) as Microsoft acquired LinkedIn for $27bn. Everything that visualization above shows below the Free Cash Flow part is about how Microsoft spends its free cash flow. Microsoft says that a 4% growth in sales and marketing expenses in 2019 was influence by an increase in a commercial sales capacity and is partially offset by a decrease in marketing expenses. For the fifth year in a row, data trends continue in the right direction in both the broader Microsoft business and in our core . In 2020 increase by 8% is driven by investments in LinkedIn and commercial sales, and an increase in bad debt expense. Microsoft EPS for the twelve months ending September 30, 2020 was $6.20, a 16.98% increase year-over-year. Free cash flow is one of the most crucial cash flow metrics, showing how much cash can Microsoft generate. 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. On the other hand, we also have two smaller, fast-growing revenue sources on the right, which are LinkedIn and Other (mostly Dynamics). Windows’ importance for Microsoft revenue is slowly decreasing, and Windows currently has a 16% share on total revenue. 2020 ANNUAL REPORT. Visualization in the form of bubble chart below offers a summary of how different expense items are changing in 2020 compared to 2019. The rest of the revenue is spread out into different smaller revenue sources. It might look that Microsoft does not need any introduction since everybody has heard of it. *The upcoming earnings date is derived from an algorithm based on a company's historical reporting dates. endobj 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. But to compare these two clouds this way kind of misses the point where Microsoft’s cloud business is heading. What Business is Microsoft In? It includes revenue from providing premier support of its products and consulting and training on how to best use Microsoft’s products. 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. What drives the overall operating margin increase is lower growth in all expenses except Research & Development. It is currently tiny but fits company strategy very well. The operating margin of Microsoft is increasing for the last couple of years, and in 2020 was at respectful 37% of revenues. It comes fully editable, allowing you to implement brand identity and customize the report according to your data. Headcount grew between 6%-5% both in 2018, 2019 and 2020. Thanks to this combination, it was the single biggest absolute revenue growth reason in 2020. In 2020 however, even the non-professinall OEM segment was growing by 5% probably because of COVID-19. Microsoft’s financial statement offers three different ways of how we can break down its revenues. Today, I’m sharing the progress we’re making toward our goal to increase diversity at Microsoft globally. endobj Our global health response team is acting to help protect our employees in accordance with global health authorities’ guidance. /CreationDate (D:20200801181617Z) Worldwide, Microsoft employees […] However, Microsoft offers enough comments in its financial statements about what drives different pieces of revenue that we can easily get into much bigger detail for the most significant revenue sources and better understand what is going on under the hood. And since the LinkedIn acquisition was finance by debt, you can see a significant increase in long-term debt, which is Microsoft slowly repaying each year. Below is financial information derived from the audited consolidated financial statements. On the other hand, legacy on-premise business is in decline. Microsoft Annual Reports. 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. /Producer (�� Q t 4 . The Annual Microsoft Vulnerabilities Report The 2020 Microsoft Vulnerabilities Report compiles every Microsoft security bulletin from the past 12 months, analyzes … 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. Is it used to strengthen Microsoft’s already impressive cash pile, repay debt, or to pay out to shareholders? It is not a cornerstone of Microsoft’s business anymore, but it is still crucial as part of its full business software offerings. If the company did not provide it, I show the historical years as they were reported. 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. 1 2 . Let’s compare sales and marketing expenses growth with headcount growth in sales & marketing. VIEW ONLINE. I will explain what is going on using custom charts and will summarize key takeaways for you. Microsoft’s story is about once a dominant company that ruled in the PC era and later got under pressure as consumers shifted from PC to smartphones. Aim of the bubble chart below is to visualize : Overall, what this chart visualizes nicely is that the biggest revenue source(Server Products & Services) is also the fastest-growing, which makes it the core driver of Microsoft revenue growth both relatively and absolutely. Detailed breakdown of how Google makes money from Android. View all MSFT assets, cash, debt, liabilities, shareholder equity and investments. /Height 103 But let’s keep in mind that even though the consumer market is not the company’s focus right now, it does not mean that there is not a long-term aspiration within Microsoft to get back into it when the right opportunity presents itself. Let’s ignore the smaller items and focus on the three main ways how Microsoft used its $45bn (or $34bn adjusted). Two revenue sources mentioned above make together more than 60% of Microsoft revenue. It is also the fastest-growing part of revenues since 2015. In 2020 LinkedIn contributed $8.1bn to Microsoft’s revenue, which was 20% growth. 8 - 4 MARCH 2020 Attached please find the full report as PDF file Annual Report 2019 and Outlook 2020 Today, the Board of Directors. 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. /Creator (�� w k h t m l t o p d f 0 . As I showed earlier, the cost of revenue for prouducts and the cost of revenue for services are moving in different directions as services are usually new faster-growing income streams compared to “legacy” products. Finally, let me offer you a less traditional look at how different Microsoft’s revenue sources or product lines are growing. What precisely this revenue consists of and where it comes from? 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. In fiscal year 2020, Microsoft Corporation spent 19.6 billion U.S. dollars on sales and marketing, the company’s highest annual expenditure to date. The total cost of revenue is growing by 7%, which is below the revenue growth. Our global health response team is acting to help protect our employees in accordance with global health authorities’ guidance. By deducting investment into property and equipment, we arrive at $45bn of free cash flow. The fact that Microsoft board recognized the importance of cloud for the future of Microsoft might have been the important reason why Nadella was chosen for the top job to continue pushing the cloud further. Gaming (Xbox) is the only solely consumer-focused business that might look out of place considering Microsoft’s new business focus strategy. But the story is not over yet, and it looks that things are poised to get even better for Microsoft. Dynamics offers business customers different modules for enterprise resource planning (ERP) or Customer Relationship Management (CRM). It shows how Microsoft’s $61bn cash flow from operations (Net operating cash flow) was used in 2020. Microsoft Corp. /Filter /FlateDecode Tesla Annual Report 2020 Form 10-K (NASDAQ:TSLA) Published: April 28th, 2020 PDF generated by stocklight.com . Form 10-K Microsoft Corp Annual report [Section 13 and 15(d), not S-K Item 405] SEC.report. The chart below offers a look at total revenue development and detailed revenue streams for the last five years. One example can be Microsoft’s new Surface Duo device, altough these attempts are focused mainly on “professionals” and productivity, which is in line with Microsoft’s business focus. Total Microsoft’s headcount was 163 000 at the end of 2020. For example, Office revenue is growing by 11% on overage, but if we break it down, there is a decline in on-premise licensing (product), and users are switching to Office 365 (service). Not much to see there, the split is 50:50 and does not change much. /Subtype /Image Azure is Microsoft’s cloud service, which is the second-biggest cloud after Amazon’s AWS. The company name was Nokia. Below you can find a functional breakdown of total expenses into several categories. 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. 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 0 obj 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 /Width 480 How did it develop thorough the last five years? Another not so much a takeaway then just a reminder is that Windows, although not anymore cornerstone of. Dynamics is not a household name, but its cloud version Dynamics 365 might be one of the drivers of Microsoft growth in years ahead, even though Dynamics is tiny now at approximately $3bn of annual revenue. Therefore, rumors and comments about possible divestment of gaming business are flying around. 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. DOWNLOAD NOW. Microsoft today reported fiscal Q4 2020 earnings, including revenue of $38.0 billion, net income of $11.2 billion, and earnings per share of $1.46. 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. That is good news and means the operating margin increased to 37%, which is very respectful, and it would be even higher if we did not count loss-making LinkedIn revenue and expenses. Microsoft annual revenue for 2020 was $143.015B, a 13.65% increase from 2019. These are investments mainly into Microsoft’s data centers, hardware for these data centers, and partially also for office space for its ever-growing workforce. The most significant revenue increase in the dollar amount is from Server Products and Services segment, which provided over half of the total revenue increase in 2020. Microsoft Corporation Annual Report 2020 Form 10-K (NASDAQ:MSFT) Published: July 31st, 2020 PDF generated by stocklight.com . It might be one of the significant opportunities for revenue growth years ahead. 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. And a story that Microsoft’s annual report and financial statements tell is a classic “comeback” story. Growth in 2020 was only 1% vs. 9% last year driven mainly by COVID-19 impact in Q3 and mainly Q4 2020 (-18% y/y growth). It is all about business customers. Products are usually legacy products that Microsoft doesn’t develop so actively, and company resources are shifting to services. “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. 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. 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. I will meet you below the chart, and we will look at each product revenue stream individually. Together with Office revenue source is the core driver of Microsoft’s recent success. In the second place are Office products and services. These are not limited just to traditional Excel, Word, and PowerPoint. Note: Growth in LinkedIn revenue between 2018 and 2017 is not comparable because the 2017 value is only for half of the year. It was perceived as a surprising and questionable move, and the jury is still out on if this acquisition will deliver what was promissed. Crown jewel, however, is fast-growing Azure cloud. You can see how the cost of revenue and services offset each other as services become more important for Microsoft. Still, this growth is more than offset by lower growth in Sales and Marketing and lower growth in the cost of revenue for products. 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. 3 0 obj Everything culminated by the questionable acquisition of another struggling company that once dominated its market. The growth in 2020 is roughly in line with the increase in the number of employees in research and development, which increased by 17% to 56 000 people. Ten years of annual and quarterly financial statements and annual report data for Microsoft (MSFT). /Length 9 0 R described in our 2019 Diversity & Inclusion report. But the data also highlight areas where we need to redouble our efforts. Still, the total number is what really matters because if customers switch from on-premise licensing to Office 365, it is apparent that we will see high growth for a while in Office 365. 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 […] h t m) /AIS false 2020 Annual Report Template Word. To do that, I use information company itself provided. 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. Microsoft Office Products and Services category includes both legacy on-premise office licensing and also modern Office 365 subscriptions, where companies can choose from different packages of tools. In fiscal Q4 2020, Microsoft reported $13.4 billion in revenue from Intelligent Cloud, a 17% increase over the same quarter last year. Past Events. This cost category deserves our attention because although it increases its growth to 13% increase in 2018, it slowed down again in 2019 and 2020. The issue was not primarily in company profits at the time, as it was able to keep making money from its legacy products.

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