There was little not to like for Microsoft shareholders about fiscal Q4 ended June 30. It was yet another cloud-fueled blockbuster quarter for the Redmond-based company, surpassing analysts' expectations once again.

Revenue from commercial cloud, which includes Microsoft Azure, the commercial parts of Office 365 and LinkedIn – as well as Dynamics 365 – was up 36%, year-on-year, to $19.5 billion. For the full fiscal year commercial cloud raked in a bumper $69 billion, a 34% jump compared with FY20.

Strong growth trends look set to continue.

Figure 1: My way: Doing it Microsoft's way has paid off again, as earnings beat analysts' expectations.
(Source: Todd A Bishop on Flickr CC2.0)

"In our commercial business, healthy demand for our differentiated hybrid and cloud offering, as well as increased long-term commitment to our platform drove significant growth in the number of $10 million-plus Azure and Microsoft 365 contracts," proclaimed Microsoft CFO Amy Hood on the company’s earnings conference call (as transcribed by Seeking Alpha).

Commercial bookings growth in Q4, noted Hood, was up 30% year-on-year-year, driven in part by an increase in the number of larger, longer-term Azure contracts. Commercial cloud gross margin of 70% was up 4% year-on-year.

Microsoft CEO Satya Nadella highlighted a company that he clearly thought was firing on all fronts.

"In the past three years alone, gaming, security – and now LinkedIn – have all surpassed $10 billion in annual revenue," he said.

The upshot was healthy bounces for headline Q4 financial metrics. Year-on-year sales were up 21%, to $46.2 billion. The top-line performance beat comfortably a $44.3 billion average estimate of analysts polled by Bloomberg.

Operating income jumped 42% over the same period, to $19.1 billion, although operating expenses were up 6%, to $13.1 billion, which Microsoft attributed to continued investment in commercial sales and cloud engineering.

Net income powered up by 47%, to $16.5 billion, while diluted earnings per share (EPS), at $2.17, leapt 49% compared with Q4 FY20. Analysts, according to Bloomberg, had predicted a diluted EPS of $1.92.

Segment by segment

Scrolling down each of Microsoft's three business segments, mostly everything – at least turnover-wise – appears on an upward trajectory.

Sales in the Productivity and Business Processes division was up 20%, to $14.7 billion, driven by increases in Office 365 commercial revenue, LinkedIn and Dynamics products, and cloud services revenue. Turnover at Intelligent Cloud, where Microsoft Azure sits, was up 30%, to $17.4 billion.

The More Personal Computing division drummed up $14.1 billion in sales, up 9% compared with Q4 2020. There was, however, a 4% dip in Xbox content and services revenue.

Azure assurance

There were apparently some initial investor wobbles as the closely watched Azure revenue metric, when measured on a constant currency basis, showed signs of a growth slowdown.

At 45% year-on-year growth – hardly slovenly in Light Reading's book – it was nonetheless slightly off the pace compared to previous quarters. Microsoft's share price dipped by 2.5% when Q4 results were released.

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"In constant currency, Azure revenue growth should remain relatively stable on a sequential basis," reassured Hood on the earnings conference call.

Combined with a positive business outlook for Q1 FY22 across its different segments, it helped calm investor nerves. The share price recovered a fair chunk of the lost ground by the end of day's trading on Nasdaq.

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— Ken Wieland, contributing editor, special to Light Reading