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Microsoft reported its December quarter numbers that beat on both revenue and profit but issued lighter revenue guidance for 2024. The company's shares are up almost 70% over the past year, and they're 11% higher in 2024 so far.
The enterprise software giant generated $62 billion in revenue, up 18% year-on-year, and net income of $21.9 billion, up 33%, its highest profit growth since 2020. A large thanks must go to the intelligent cloud division, which includes AI-heavy Azure, growing by 30%.
This quarter marks Microsoft's first earnings report since becoming a $3 trillion company and includes revenue from its recent Activision Blizzard acquisition, making gaming the third-largest business. Office and cloud revenue remain the top contributors, accounting for nearly 60% of Microsoft's overall revenue.
Microsoft's Office division continues to perform well, with productivity and business processes revenue up 13% year-over-year. Microsoft 365 Consumer subscribers have reached 78.4 million, nearly 16% up year-over-year. Office commercial products and cloud services revenue grew by 15%, ending the quarter with over 400 million paid commercial seats.
Microsoft's intelligent cloud business generated $25.9 billion in revenue, a 20% year-over-year increase, mostly driven by Azure.
Microsoft's gaming division has seen a 49% increase in revenue to $7.11 billion for the quarter, bolstered by the inclusion of Activision Blizzard, and has also seen a substantial increase in Xbox content and services revenue, up by 61%. Microsoft CFO Amy Hood expects overall gaming revenue to grow in the low 40% range next quarter, with around 45% due to the Activision Blizzard acquisition.
Microsoft's AI strategy includes AI software assistants called Copilot, powered by the same technology behind ChatGPT. Copilot was rolled out for Microsoft 365, offering features like summarising transcripts of video calls and generating emails. We are optimistic that businesses will adopt Copilot, creating a significant new revenue stream for Microsoft.
We love this business. It is diversified across enterprise software with annuity-like income through all its subscription services. Microsoft should be an anchor position in your portfolio if you don't already own it.
