Exhibit 99.1

Microsoft Cloud Powers Record Fourth Quarter Results

REDMOND, Wash. — July 18, 2019 — Microsoft Corp. today announced the following results for the quarter ended June 30, 2019, as compared to the corresponding period of last fiscal year:

 

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Revenue was $33.7 billion and increased 12%

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Operating income was $12.4 billion and increased 20%

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Net income was $13.2 billion GAAP and $10.6 billion non-GAAP, and increased 49% and 21%, respectively

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Diluted earnings per share was $1.71 GAAP and $1.37 non-GAAP, and increased 50% and 21%, respectively

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GAAP results include a $2.6 billion net income tax benefit explained in the Non-GAAP Definition section below

“It was a record fiscal year for Microsoft, a result of our deep partnerships with leading companies in every industry,” said Satya Nadella, chief executive officer of Microsoft. “Every day we work alongside our customers to help them build their own digital capability — innovating with them, creating new businesses with them, and earning their trust. This commitment to our customers’ success is resulting in larger, multi-year commercial cloud agreements and growing momentum across every layer of our technology stack.”

The following table reconciles our financial results reported in accordance with generally accepted accounting principles (GAAP) to non-GAAP financial results. Additional information regarding our non-GAAP definition is provided below. All growth comparisons relate to the corresponding period in the last fiscal year.

 

		Three Months Ended June 30,
($ in millions, except per share amounts)		Revenue				Operating     Income				Net Income				Diluted     Earnings per     Share
2018 As Reported (GAAP)			$30,085				$10,379				$8,873				$1.14
Net Impact of the Tax Cuts and Jobs Act (TCJA)			-				-				(104)				(0.01)
2018 As Adjusted (non-GAAP)			$30,085				$10,379				$8,769				$1.13
2019 As Reported (GAAP)			$33,717				$12,405				$13,187				$1.71
Net Tax Impact of Transfer of Intangible Properties			-				-				(2,567)				(0.34)
2019 As Adjusted (non-GAAP)			$33,717				$12,405				$10,620				$1.37
Percentage Change Y/Y (GAAP)			12%				20%				49%				50%
Percentage Change Y/Y (non-GAAP)			12%				20%				21%				21%
Percentage Change Y/Y (non-GAAP) Constant Currency			14%				24%				24%				24%

The current quarter effective tax rate was (5)% and 16% on a GAAP and non-GAAP basis, respectively. GAAP results include a net income tax benefit of $2.6 billion for the fourth quarter of fiscal year 2019 and a net income tax benefit of $104 million for the fourth quarter of fiscal year 2018. These net tax benefits are excluded from our non-GAAP results and explained in the Non-GAAP Definition section below.

Microsoft returned $7.7 billion to shareholders in the form of share repurchases and dividends in the fourth quarter of fiscal year 2019.

“Q4 commercial cloud revenue increased 39% year-over-year to $11.0 billion, driving our strongest commercial quarter ever,” said Amy Hood, executive vice president and chief financial officer of Microsoft.

Revenue in Productivity and Business Processes was $11.0 billion and increased 14% (up 17% in constant currency), with the following business highlights:

 

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Office Commercial products and cloud services revenue increased 14% (up 16% in constant currency) driven by Office 365 Commercial revenue growth of 31% (up 34% in constant currency)

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Office Consumer products and cloud services revenue increased 6% (up 8% in constant currency) and Office 365 Consumer subscribers increased to 34.8 million

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LinkedIn revenue increased 25% (up 28% in constant currency) with record levels of engagement highlighted by LinkedIn sessions growth of 22%

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Dynamics products and cloud services revenue increased 12% (up 15% in constant currency) driven by Dynamics 365 revenue growth of 45% (up 48% in constant currency)

Revenue in Intelligent Cloud was $11.4 billion and increased 19% (up 21% in constant currency), with the following business highlights:

 

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Server products and cloud services revenue increased 22% (up 24% in constant currency) driven by Azure revenue growth of 64% (up 68% in constant currency)

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Enterprise Services revenue increased 4% (up 6% in constant currency)

Revenue in More Personal Computing was $11.3 billion and increased 4% (up 6% in constant currency), with the following business highlights:

 

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Windows OEM revenue increased 9% (up 9% in constant currency)

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Windows Commercial products and cloud services revenue increased 13% (up 16% in constant currency)

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Surface revenue increased 14% (up 17% in constant currency)

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Search advertising revenue excluding traffic acquisition costs increased 9% (up 10% in constant currency)

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Gaming revenue declined 10% (down 8% in constant currency) with Xbox software and services revenue down 3% (down 1% in constant currency)

Fiscal Year 2019 Results

Microsoft Corp. today announced the following results for the fiscal year ended June 30, 2019, as compared to the corresponding period of last fiscal year:

 

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Revenue was $125.8 billion and increased 14%

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Operating income was $43.0 billion and increased 23%

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Net income was $39.2 billion GAAP and $36.8 billion non-GAAP, and increased 137% and 22%, respectively

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Diluted earnings per share was $5.06 GAAP and $4.75 non-GAAP, and increased 138% and 22%, respectively

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GAAP results include a $2.6 billion net income tax benefit explained in the Non-GAAP Definition section below

The following table reconciles our financial results reported in accordance with GAAP to non-GAAP financial results. Additional information regarding our non-GAAP definition is provided below. All growth comparisons relate to the corresponding period in the last fiscal year.

 

		Twelve Months Ended June 30,
($ in millions, except per share amounts)		Revenue				Operating     Income				Net Income				Diluted     Earnings per     Share
2018 As Reported (GAAP)			$110,360				$35,058				$16,571				$2.13
Net Impact of the TCJA			-				-				13,696				1.75
2018 As Adjusted (non-GAAP)			$110,360				$35,058				$30,267				$3.88
2019 As Reported (GAAP)			$125,843				$42,959				$39,240				$5.06
Net Tax Impact of Transfer of Intangible Properties			-				-				(2,567)				(0.33)
Net Impact of the TCJA			-				-				157				0.02
2019 As Adjusted (non-GAAP)			$125,843				$42,959				$36,830				$4.75
Percentage Change Y/Y (GAAP)			14%				23%				137%				138%
Percentage Change Y/Y (non-GAAP)			14%				23%				22%				22%
Percentage Change Y/Y (non-GAAP) Constant Currency			15%				24%				22%				23%

The current year effective tax rate was 10% and 16% on a GAAP and non-GAAP basis, respectively. GAAP results include a net income tax benefit of $2.6 billion and a net income tax charge of $157 million for the twelve months ended June 30, 2019. GAAP results include a net income tax charge of $13.7 billion for the twelve months ended June 30, 2018. These net tax impacts are excluded from our non-GAAP results and explained in the Non-GAAP Definition section below.

Business Outlook

Microsoft will provide forward-looking guidance in connection with this quarterly earnings announcement on its earnings conference call and webcast.

Quarterly Highlights, Product Releases, and Enhancements

Every quarter Microsoft delivers hundreds of products, either as new releases, services, or enhancements to current products and services. These releases are a result of significant research and development investments, made over multiple years, designed to help customers be more productive and secure and to deliver differentiated value across the cloud and the edge.

Here are the major product releases and other highlights for the quarter, organized by product categories, to help illustrate how we are accelerating innovation across our businesses while expanding our market opportunities.

Webcast Details

Satya Nadella, chief executive officer, Amy Hood, executive vice president and chief financial officer, Frank Brod, chief accounting officer, Keith Dolliver, deputy general counsel, and Michael Spencer, general manager of investor relations, will host a conference call and webcast at 2:30 p.m. Pacific time (5:30 p.m. Eastern time) today to discuss details of the company’s performance for the quarter and certain forward-looking information. The session may be accessed at http://www.microsoft.com/en-us/investor. The webcast will be available for replay through the close of business on July 18, 2020.

Non-GAAP Definition

Transfer of Intangible Properties. In the fourth quarter of fiscal year 2019, in response to the TCJA and recently issued regulations, we transferred certain intangible properties held by our foreign subsidiaries to the United States and Ireland. The transfers of intangible properties resulted in a net $2.6 billion tax benefit recorded in the fourth quarter of fiscal year 2019, as the value of future tax deductions exceeded the current tax liability from foreign jurisdictions and United States Global Intangible Low-Taxed Income (GILTI) tax.

The TCJA Impact. We recorded a net charge of $157 million during the twelve months ended June 30, 2019 related to the TCJA. We recorded a net benefit of $104 million during the three months ended June 30, 2018 and a net charge of $13.7 billion during the twelve months ended June 30, 2018 related to the TCJA.

We have provided non-GAAP financial measures related to the transfer of intangible properties and the TCJA to aid investors in better understanding our performance. We believe these non-GAAP measures assist investors by providing additional insight into our operational performance and help clarify trends affecting our business. For comparability of reporting, management considers non-GAAP measures in conjunction with GAAP financial results in evaluating business performance. The non-GAAP financial measures presented in this release should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP.

Constant Currency

Microsoft presents constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars using the average exchange rates from the comparative period rather than the actual exchange rates in effect during the respective periods. All growth comparisons relate to the corresponding period in the last fiscal year. Microsoft has provided this non-GAAP financial information to aid investors in better understanding our performance. The non-GAAP financial measures presented in this release should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP.

Financial Performance Constant Currency Reconciliation

 

		Three Months Ended June 30,
($ in millions, except per share amounts)		Revenue				Operating     Income				Net Income				Diluted     Earnings per     Share
2018 As Reported (GAAP)			$30,085				$10,379				$8,873				$1.14
2018 As Adjusted (non-GAAP)			$30,085				$10,379				$8,769				$1.13
2019 As Reported			$33,717				$12,405				$13,187				$1.71
2019 As Adjusted (non-GAAP)			$33,717				$12,405				$10,620				$1.37
Percentage Change Y/Y (GAAP)			12%				20%				49%				50%
Percentage Change Y/Y (non-GAAP)			12%				20%				21%				21%
Constant Currency Impact			$(639)				$(444)				$(250)				$(0.03)
Percentage Change Y/Y (non-GAAP) Constant Currency			14%				24%				24%				24%

 

		Twelve Months Ended June 30,
($ in millions, except per share amounts)		Revenue				Operating     Income				Net Income				Diluted     Earnings per     Share
2018 As Reported (GAAP)			$110,360				$35,058				$16,571				$2.13
2018 As Adjusted (non-GAAP)			$110,360				$35,058				$30,267				$3.88
2019 As Reported			$125,843				$42,959				$39,240				$5.06
2019 As Adjusted (non-GAAP)			$125,843				$42,959				$36,830				$4.75
Percentage Change Y/Y (GAAP)			14%				23%				137%				138%
Percentage Change Y/Y (non-GAAP)			14%				23%				22%				22%
Constant Currency Impact			$(1,116)				$(505)				$(147)				$(0.02)
Percentage Change Y/Y (non-GAAP) Constant Currency			15%				24%				22%				23%

Segment Revenue Constant Currency Reconciliation

 

		Three Months Ended June 30,
($ in millions)		Productivity and Business Processes				Intelligent Cloud				More Personal       Computing
2018 As Reported			$9,668				$9,606				$10,811
2019 As Reported			$11,047				$11,391				$11,279
Percentage Change Y/Y			14%				19%				4%
Constant Currency Impact			$(249)				$(229)				$(161)
Percentage Change Y/Y Constant Currency			17%				21%				6%

Selected Product and Service Revenue Constant Currency Reconciliation

 

		Three Months Ended June 30, 2019
		Percentage Change Y/Y (GAAP)				Constant Currency Impact				Percentage Change Y/Y Constant Currency
Office Commercial products and cloud services			14%				2%				16%
Office 365 Commercial			31%				3%				34%
Office Consumer products and cloud services			6%				2%				8%
LinkedIn			25%				3%				28%
Dynamics products and cloud services			12%				3%				15%
Dynamics 365			45%				3%				48%
Server products and cloud services			22%				2%				24%
Azure			64%				4%				68%
Enterprise Services			4%				2%				6%
Windows OEM			9%				0%				9%
Windows Commercial products and cloud services			13%				3%				16%
Search advertising excluding traffic acquisition costs			9%				1%				10%
Surface			14%				3%				17%
Gaming			(10)%				2%				(8)%
Xbox software and services			(3)%				2%				(1)%

About Microsoft

Microsoft (Nasdaq “MSFT” @microsoft) enables digital transformation for the era of an intelligent cloud and an intelligent edge. Its mission is to empower every person and every organization on the planet to achieve more.

Forward-Looking Statements

Statements in this release that are “forward-looking statements” are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors such as:

 

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intense competition in all of our markets that may lead to lower revenue or operating margins;

 

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increasing focus on cloud-based services presenting execution and competitive risks;

 

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significant investments in products and services that may not achieve expected returns;

 

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acquisitions, joint ventures, and strategic alliances that may have an adverse effect on our business;

 

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impairment of goodwill or amortizable intangible assets causing a significant charge to earnings;

 

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cyberattacks and security vulnerabilities that could lead to reduced revenue, increased costs, liability claims, or harm to our reputation or competitive position;

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disclosure and misuse of personal data that could cause liability and harm to our reputation;

 

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the possibility that we may not be able to protect information stored in our products and services from use by others;

 

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abuse of our advertising or social platforms that may harm our reputation or user engagement;

 

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the development of the internet of things presenting security, privacy, and execution risks;

 

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issues about the use of artificial intelligence in our offerings that may result in competitive harm, legal liability, or reputational harm; and

 

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excessive outages, data losses, and disruptions of our online services if we fail to maintain an adequate operations infrastructure;

 

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quality or supply problems;

 

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the possibility that we may fail to protect our source code;

 

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legal changes, our evolving business model, piracy, and other factors may decrease the value of our intellectual property;

 

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claims that Microsoft has infringed the intellectual property rights of others;

 

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claims against us that may result in adverse outcomes in legal disputes;

 

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government litigation and regulatory activity relating to competition rules that may limit how we design and market our products;

 

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potential liability under trade protection, anti-corruption, and other laws resulting from our global operations;

 

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laws and regulations relating to the handling of personal data that may impede the adoption of our services or result in increased costs, legal claims, fines, or reputational damage;

 

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additional tax liabilities;

 

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damage to our reputation or our brands that may harm our business and operating results.

 

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exposure to increased economic and operational uncertainties from operating a global business, including the effects of foreign currency exchange;

 

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adverse economic or market conditions that may harm our business;

 

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catastrophic events or geo-political conditions that may disrupt our business;

 

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the dependence of our business on our ability to attract and retain talented employees; and

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changes in our sales organization that may impact revenues.

For more information about risks and uncertainties associated with Microsoft’s business, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of Microsoft’s SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting Microsoft’s Investor Relations department at (800) 285-7772 or at Microsoft’s Investor Relations website at http://www.microsoft.com/en-us/investor.

All information in this release is as of June 30, 2019. The company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company’s expectations.

For more information, press only:

Microsoft Media Relations, WE Communications for Microsoft, (425) 638-7777, rrt@we-worldwide.com

For more information, financial analysts and investors only:

Michael Spencer, General Manager, Investor Relations, (425) 706-4400

Note to editors: For more information, news and perspectives from Microsoft, please visit the Microsoft News Center at http://www.microsoft.com/news. Web links, telephone numbers, and titles were correct at time of publication, but may since have changed. Shareholder and financial information, as well as today’s 2:30 p.m. Pacific time conference call with investors and analysts, is available at http://www.microsoft.com/en-us/investor.

MICROSOFT CORPORATION    

INCOME STATEMENTS

(In millions, except per share amounts) (Unaudited)

 

		Three Months Ended June 30,								Twelve Months Ended June 30,
		2019				2018				2019				2018
Revenue:
Product			$17,103				$17,159				$66,069				$64,497
Service and other			16,614				12,926				59,774				45,863
Total revenue			33,717				30,085				125,843				110,360
Cost of revenue:
Product			3,298				3,517				16,273				15,420
Service and other			7,114				6,225				26,637				22,933
Total cost of revenue			10,412				9,742				42,910				38,353
Gross margin			23,305				20,343				82,933				72,007
Research and development			4,513				3,933				16,876				14,726
Sales and marketing			4,962				4,760				18,213				17,469
General and administrative			1,425				1,271				4,885				4,754
Operating income			12,405				10,379				42,959				35,058
Other income, net			191				301				729				1,416
Income before income taxes			12,596				10,680				43,688				36,474
Provision for (benefit from) income taxes			(591)				1,807				4,448				19,903
Net income			$13,187				$8,873				$39,240				$16,571
Earnings per share:
Basic			$1.72				$1.15				$5.11				$2.15
Diluted			$1.71				$1.14				$5.06				$2.13
Weighted average shares outstanding:
Basic			7,655				7,683				7,673				7,700
Diluted			7,730				7,775				7,753				7,794

MICROSOFT CORPORATION    

 

COMPREHENSIVE INCOME STATEMENTS

(In millions) (Unaudited)

 

		Three Months Ended June 30,								Twelve Months Ended June 30,
		2019				2018				2019				2018
Net income			$13,187				$8,873				$39,240				$16,571
Other comprehensive income (loss), net of tax:
Net change related to derivatives			(80)				145				(173)				39
Net change related to investments			1,071				(535)				2,405				(2,717)
Translation adjustments and other			(66)				(686)				(318)				(178)
Other comprehensive income (loss)			925				(1,076)				1,914				(2,856)
Comprehensive income			$14,112				$7,797				$41,154				$13,715

MICROSOFT CORPORATION    

 

BALANCE SHEETS

(In millions) (Unaudited)

 

		June 30, 2019				June 30, 2018
Assets
Current assets:
Cash and cash equivalents			$11,356				$11,946
Short-term investments			122,463				121,822
Total cash, cash equivalents, and short-term investments			133,819				133,768
Accounts receivable, net of allowance for doubtful accounts of $411 and $377			29,524				26,481
Inventories			2,063				2,662
Other			10,146				6,751
Total current assets			175,552				169,662
Property and equipment, net of accumulated depreciation of $35,330 and $29,223			36,477				29,460
Operating lease right-of-use assets			7,379				6,686
Equity and other investments			2,649				1,862
Goodwill			42,026				35,683
Intangible assets, net			7,750				8,053
Other long-term assets			14,723				7,442
Total assets			$286,556				$258,848
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable			$9,382				$8,617
Current portion of long-term debt			5,516				3,998
Accrued compensation			6,830				6,103
Short-term income taxes			5,665				2,121
Short-term unearned revenue			32,676				28,905
Other			9,351				8,744
Total current liabilities			69,420				58,488
Long-term debt			66,662				72,242
Long-term income taxes			29,612				30,265
Long-term unearned revenue			4,530				3,815
Deferred income taxes			233				541
Operating lease liabilities			6,188				5,568
Other long-term liabilities			7,581				5,211
Total liabilities			184,226				176,130
Commitments and contingencies
Stockholders’ equity:
Common stock and paid-in capital — shares authorized 24,000; outstanding 7,643 and 7,677			78,520				71,223
Retained earnings			24,150				13,682
Accumulated other comprehensive loss			(340)				(2,187)
Total stockholders’ equity			102,330				82,718
Total liabilities and stockholders’ equity			$286,556				$258,848

MICROSOFT CORPORATION    

 

CASH FLOWS STATEMENTS

(In millions) (Unaudited)

 

		Three Months Ended  June 30,								Twelve Months Ended  June 30,
		2019				2018				2019				2018
Operations
Net income			$13,187				$8,873				$39,240				$16,571
Adjustments to reconcile net income to net cash from operations:
Depreciation, amortization, and other			2,924				2,516				11,682				10,261
Stock-based compensation expense			1,190				1,012				4,652				3,940
Net recognized gains on investments and derivatives			(322)				(567)				(792)				(2,212)
Deferred income taxes			(5,723)				(2,389)				(6,463)				(5,143)
Changes in operating assets and liabilities:
Accounts receivable			(10,070)				(9,188)				(2,812)				(3,862)
Inventories			(113)				(572)				597				(465)
Other current assets			(854)				(839)				(1,718)				(952)
Other long-term assets			(865)				550				(1,834)				(285)
Accounts payable			1,264				1,010				232				1,148
Unearned revenue			9,005				8,702				4,462				5,922
Income taxes			3,808				903				2,929				18,183
Other current liabilities			2,436				1,773				1,419				798
Other long-term liabilities			241				(366)				591				(20)
Net cash from operations			16,108				11,418				52,185				43,884
Financing
Repayments of short-term debt, maturities of 90 days or less net			0				0				0				(7,324)
Proceeds from issuance of debt			0				0				0				7,183
Repayments of debt			(1,000)				(681)				(4,000)				(10,060)
Common stock issued			308				255				1,142				1,002
Common stock repurchased			(4,633)				(2,362)				(19,543)				(10,721)
Common stock cash dividends paid			(3,521)				(3,226)				(13,811)				(12,699)
Other, net			160				(25)				(675)				(971)
Net cash used in financing			(8,686)				(6,039)				(36,887)				(33,590)
Investing
Additions to property and equipment			(4,051)				(3,980)				(13,925)				(11,632)
Acquisition of companies, net of cash acquired, and purchases of intangible and other assets			(281)				(434)				(2,388)				(888)
Purchases of investments			(15,442)				(32,380)				(57,697)				(137,380)
Maturities of investments			5,154				7,108				20,043				26,360
Sales of investments			7,363				27,024				38,194				117,577
Securities lending payable			0				(8)				0				(98)
Net cash used in investing			(7,257)				(2,670)				(15,773)				(6,061)
Effect of foreign exchange rates on cash and cash equivalents			(21)				16				(115)				50
Net change in cash and cash equivalents			144				2,725				(590)				4,283
Cash and cash equivalents, beginning of period			11,212				9,221				11,946				7,663
Cash and cash equivalents, end of period			$11,356				$11,946				$11,356				$11,946