Microsoft: The Enduring Tech Superstar

• In 2022, the Microsoft market cap reached $1.91 trillion.
• Almost 70% of organizations use Microsoft Azure for their cloud services worldwide.
• More than 95% of Fortune 100 companies trust Microsoft Azure.
• Four out of every five Fortune 500 companies use Microsoft Office 365.
• From March to June 2020, the users of the Microsoft team increased by 894%.
• The number of Teams users jumped from 20 million in 2019 to 115 million in 2020.
• Microsoft Office 365 controls nearly half of the office productivity software market.
• In August 2022, Windows occupied 28.79% of the Operating System market share worldwide.
• Windows runs on 1.6 billion active devices in 2022.
• About 100 million gamers use Xbox in 2022.
• In 2022, 158 million people use Microsoft Edge.
• More than 52% of Exchange users prefer the on–premises version.
• Microsoft saw a 17% increase in annual revenue from 2020 to 2021.
• Microsoft’s net income was $461.3 billion in 2021.
• China represents less than 2% of Microsoft’s revenue.
• Microsoft Initial Public Offering shares on March 14, 1986, were $21.
• In 2022, Teams was used monthly by 270 million people. Statista states that Teams became the most popular business communication platform, vastly  outperforming Slack’s 18 million active users.
• Microsoft Office 365 had a staggering 21% rise in usage to 258 million users in the first year of the pandemic.

Source: Statista 

• In 2022, Bill Gates has a net worth of $129 billion and is ranked fourth on the 2022 Forbes Billionaires List.
• Over the years, Gates has invested in dozens of companies, including Canadian National Railway and AutoNation.
• Gates is one of the largest owners of farmland in the USA.
• By 2022, Gates had donated nearly $57 billion to the Gates Foundation, including a $20 billion gift made this year. Most of Gates’s donations were gifts of Microsoft stock.
• Four years ago, Gates and other billionaires pledged $30 million to an Alzheimer’s foundation to speed up the development of tests that could diagnose the disease. In 2022, he donated $11.25 million more.
• Gates took a break from classes during his senior year in high school and spent time programming with his friend Paul Allen at a power plant in North Bonneville, Washington.
• When Bill Gates was a child, he read all day long. Eventually, his parents forbade him from bringing a book to the dinner table.

Bill Gates’s Wealth History since 2013

Like the fortunes of its founder, Bill Gates, Microsoft’s revenue has been increasing over the years, even when some of its innovations fell below everyone’s expectations. One of the most notable years in this decade was the first year of the pandemic: the company reported a whopping annual revenue of $143.015 billion, globally. The impressive 13.65% growth was enabled by the blossoming of the company’s every segment. 

In 2021, fortune smiled upon Microsoft even more radiantly. The company’s annual revenue was $168.088 billion and constituted a 17.53% increase from 2020. The quarter which ended on June 30, 2022, brought the company the slowest growth – 12% year over year – since 2020. The revenue was $51.865 billion. Microsoft’s earnings per share fell short of consensus for the first time since 2016, with net income climbing 2% to $16.74 billion. And yet, Microsoft’s revenue for the twelve months ending June 30, 2022, was positive, registering a 17.96% advance year-over-year at $198.270 billion. So far, 2022 has proved to be the company’s most successful in terms of annual revenue.

In the first quarter of the fiscal year 2023, the company’s revenue was $52.12 billion. Microsoft outperformed analysts’ predictions of $49.61 billion by 11% in Q1 2023. In the second quarter, however, the company could not spring an equally pleasant surprise on analysts, slightly missing their estimates. Microsoft reported revenue of $52.75 billion, while Wall Street was looking for $52.94 billion in Q2 2023. Microsoft’s earnings per share were $2.32 versus the expected $2.29. Year over year, the company’s total revenue increased by 2% in the fiscal second quarter. Analysts shook their heads at such meager growth, which was the slowest since 2016.

Although Microsoft experienced a slowdown in the last quarter of its fiscal year, 2022 has overall proved successful for the company. Microsoft increased its profits and returned handsome amounts of cash to investors. The company also invested in its data center infrastructure and completed the acquisition of Nuance Communications, a leader in conversational AI and ambient intelligence in healthcare, financial services, retail, and telecommunications. Despite recent 10,000 layoffs, Microsoft hired nearly 22% more people – 221,000 – in 2022 compared to 2021, when its workforce numbered 181,000 employees.

Microsoft earned $72.7 billion of net income in 2022. It generated $89 billion of operating cash flow, up 16%, and increased payments to investors by 16% to $50.8 billion. The company’s operating margin was 42%, while its balance sheet jumped by 9% to $365 billion.

Microsoft’s revenue in 2022 totaled $198.270 billion, which is $30.2 billion or 18% higher than the revenue earned in 2021. The primary sources of this revenue were Office products and services, constituting 23% of total revenue, and Azure and Other Cloud Services, amounting to 22% of 2022 revenue. Windows brought Microsoft 12% of its annual income, and so did Server Products.

The most significant revenue source, Office, generated $44.9 billion in 2022, which is $5 billion or 13% higher than the revenue it brought in the year earlier. Most of Office’s revenue comes from Office 365 subscriptions combining online and offline productivity tools. Despite its valuable contribution to Microsoft’s total revenue, Office is predicted to give way to Azure in 2023, which is not surprising, considering Azure’s fast-paced growth.

In 2022, Azure earned Microsoft $44 billion, thus increasing its input by $13.5 billion or 45% from the previous year. The third source of income in 2022 was Windows. Microsoft picked up $24.8 billion in revenue with its help and, in doing so, increased its earnings from Windows by $1.5 billion or 7%, compared to 2021.

Encouraged by its success in fiscal 2022, Microsoft is optimistic about the following year. The company’s acquisition of Xandr and its collaboration with Netflix might improve its advertising sector. Its partnership with OpenAI and planned incorporation of ChatGPT into Bing might put Microsoft’s neglected search engine on par with Google. By attracting people away from Google with its more technologically advanced search engine, Microsoft could pocket more money from there in the future. If all its plans are realized, Microsoft might expect double-digit revenue and operating income growth in constant currency and US dollars in 2023.

Microsoft Annual Revenue Worldwide ($US Billions)

Microsoft Q1 2025 Earnings

Microsoft reported its 2025 first-quarter earnings on Wednesday, October 30, with EPS of $3.30, $0.20 better than the analyst estimate of $3.10. Revenue for the quarter came in at $65.6B versus the consensus estimate of $64.55B.

“Microsoft’s earnings help cement the broad perception that AI and Cloud growth have been substantial across the board this last quarter and should keep propelling the market forward with more positive reports on the way,” said Thomas Monteiro, senior analyst at Investing.com. “Not only was the tech giant able to scale growth on both top and bottom lines, but it also did it with several corners of the operation shining brightly. Although a good part of those gains can be attributed to an improving business environment, these numbers also show that monetization across its vast suite of AI offerings is only at the start – even despite the already behemoth-sized revenue.”

“The main challenge going forward will be for the company to show it can keep delivering under a better margins backdrop in comparison to what the market has been projecting throughout the year. This hasn’t quite materialized this quarter, but when you compare MSFT’s capital expenditure growth trajectory in AI with the competition, it is likely that the curve will start flattening from here on,” he continued. “Considering that CAPEX growth has been the leading reason why the stock has underperformed the broader Nasdaq this year, this – although not a complete game-changer – does signal that Satya Nadella may be on the way to finding a better balance between spending and AI growth.”

Microsoft’s revenue is generated by three segments: Intelligent Cloud, More Personal Computing, and Productivity and Business Processes. In 2022, Microsoft generated $63.4 billion from its Productivity and Business Processes segment. It also made more than $75.3 billion through its Intelligent Cloud segment. The latter segment is represented by Microsoft’s cloud services platform, Azure.

First designed as Windows Azure in the early 2010s, Microsoft Azure has long become the company’s reply to the advance of Amazon’s AWS and Google’s Cloud Computing platforms. Azure offers basic cloud hosting services such as virtual machines, and advanced cloud services like Kubernetes engine-powered deployment, machine learning, and AI-powered bot services. Azure looks attractive in people’s eyes because of the AI platform, blockchain products, and collaboration with SAP.

In 2021, Microsoft’s Intelligent Cloud revenue grew by $11.7 billion, or 24%, compared to 2020. Microsoft’s server products and cloud services revenue increased by $11.2 billion or 27%, driven by Azure’s growth. Azure revenue increased 50% thanks to growth in Microsoft’s consumption-based services. In 2022, the Microsoft Intelligent Cloud sector reached a milestone. In the first quarter of 2022, Microsoft’s Intelligent Cloud had revenue of $17.06 billion. In the second quarter, the sector brought the company $18.33 billion. In Q3 2022, the revenue soared by 32% to $23.40 billion. 

Microsoft continued celebrating the increase of revenue also in the fourth quarter of 2022 when the Intelligent Cloud division earned $20.91 billion, which constituted a 28% jump year-over-year. The overall revenue earned in this sector is five times the goal Microsoft’s incumbent CEO set in 2015. When commenting on the sector’s performance in the fourth quarter, Satya Nadella said: “We are seeing larger and long-term commitments and a record number of $100 million-plus and $1 billion-plus deals this quarter.”

In the first fiscal quarter of 2023, revenue in the Microsoft Intelligent Cloud segment, which includes the Azure public cloud, Windows Server, SQL Server, Nuance, and Enterprise Services, was $20 billion, thus registering a $3.3 billion or 22% increase. In Q2 2023, revenue in this segment amounted to $21.51 billion, up 18% and slightly above the $21.44 consensus among analysts. Revenue from Azure and other cloud services, which Microsoft reports only in percentages, grew by 31% and exceeded the average estimate hovering around 30%. In the fiscal first quarter of 2023, the category increased by 35%.

The table below demonstrates how steadily revenue generated by the Microsoft Intelligent Cloud sector has grown over the years since 2015:

Intelligent Cloud Revenue since 2015 ($US Billions)

Microsoft has been investing in its More Personal Computing segment for decades with unwavering enthusiasm, describing it as consisting of products and services designed to put customers at the center of the experience with its technology. This segment includes the Windows operating system, Surface devices, gaming products, and search and news advertising. The revenue generated by the More Personal Computing segment has steadily been increasing over the years, which is reflected in the table below.

The only exception has so far been 2023. In the first quarter of 2023, the revenue of the More Personal Computing sector dropped slightly: falling by 3% to $13.3 billion. The decline was driven by a decrease in Windows OEM, partly offset by growth in Windows Commercial. The second quarter also brought a decline in the sector’s revenue. Its revenue was $14.2 billion, falling by 19% and 16% in constant currency, below expectations. Windows OEM revenue shrunk by 39% year over year, as analysts anticipated.

More Personal Computing Segment Revenue since 2015 ($US Billions)

This year brought losses for Microsoft in its Gaming division as its Q4 gaming revenue showed decreases in performance. In the fourth quarter of the fiscal year 2022, Microsoft published a $259 million decrease year over year, blaming the losses on the war in Ukraine that led the company to scale down its operations in Russia.

And yet, a 7% decline is not as drastic as might seem at first blush. People are actively using Xbox in 2022, proving that playing on gaming consoles is still popular and profitable for Microsoft. Despite the latest poor revenue numbers and expectations that players will move to their mobile devices to play games, the revenue generated from the Xbox business continued growing steadily until 2022, reaching a record of $15 billion last year. There are 100 million gamers in 2022 willing to splash out on Xbox and considering playing computer games with the console as a more rewarding experience. Xbox subscriptions indeed rose by 40% in 2021.

That year, the gaming revenue reached $16.23 billion, jumping from $15.37 billion in the previous fiscal period. In the fiscal first quarter of 2023, Microsoft’s gaming division brought in $3.61 billion, compared to $3.59 billion from the first quarter of the previous year. In the second fiscal quarter, however, it fared worse. Led by Xbox content and services, its gaming sector reported a 13% year-over-year decline in sales. It generated $4.76 billion in Q4.

The table below amply demonstrates that playing games with the Xbox console is not as outdated as the FY2022 revenue might suggest:

Microsoft Gaming Revenue since 2017 ($US Billions)

The statistics show that the number of people signing up for Xbox climbed by 40% in 2021. Analysts at Techjury.com explain that memberships for Game Pass and Xbox first- and third-party titles were responsible for the increased interest in gaming last year. Equally successful for Microsoft was the first year of the pandemic. Then, the number of Xbox users soared from 65 million at the end of 2019 to 90 million in April 2020.

Statistics also revealed that about 18.2% of people played video games for 4-7 hours weekly in 2020. Not long after this, the Xbox user count reached 100 million for the first time in the history of Microsoft. The progress of Microsoft Xbox users is charted in the table below:

Xbox Users since 2016

Microsoft Xbox One was launched eight years after the appearance of the Xbox 360 on the market. A Game Pass accompanied the new game console. This was an eagerly anticipated addition because it allowed people to access many Microsoft video games for a monthly subscription. Even more conveniently, Xbox One had two versions: Xbox One S and Xbox One X, differing in power and game resolution. According to the latest estimates, Microsoft has sold 50.53 million Xbox consoles, which is a far cry from 85.8 million units of Xbox 360 sold over its lifetime. Indeed, sales of the console have lost steam over the years, which is seen in the following table:

Xbox Units Sold since 2013

Microsoft Xbox One has also been enjoying a different degree of popularity in different regions across the world. Americans proved to be more enamoured with the console than other nations. In June 2022, the lifetime unit sale of Xbox One consoles in North America reached 31.58 million. In Europe, sales progressed at a slower pace, reaching 12.8 million, as is seen in the table below:

Xbox One Lifetime Unit Sales Worldwide by Region by June 2022

Microsoft has a busy schedule for the remaining part of the year and beyond, inspiring faith in its bright future. There is a strong likelihood that it might catch up with Amazon in Cloud Computing. According to Canalys, Amazon Web Services had 31% of the market share, while Microsoft came second with 24% of the market share. With such a small gap between the companies, Microsoft has the potential to gain a competitive edge over the retailer giant.

Microsoft has also been actively working on the metaverse, a next-generation version of the internet, and is improving on HoloLens, mixed-reality headsets for remote collaboration. A signed deal with the video game publisher Activision Blizzard is expected to breathe new life into Microsoft’s losing gaming business and provide materials for its metaverse.

Microsoft has also been working on breathing new life into its Bing search engine. Bing could never hold a candle to Google, but thanks to OpenAI, Microsoft could tilt the balance in favor of its little-used search engine. OpenAI has developed ChatGPT that answers complex questions conversationally, which Microsoft is considering adding to Bing. Microsoft has recently invested $10 billion into OpenAI in addition to $3 billion given since 2019. Equipped with ChatGPT, Microsoft’s search engine might soon seduce users away from Google, becoming its strongest rival or even vanquisher.

Considering Microsoft’s grandiose plans for the future, analysts feel optimistic about its growth in the next five years, even though this year the company emerged weaker than they had expected. Analysts from Investors.com agree that Microsoft stock could soar to $334.80 over the coming year. A more buoyant view is that it could surge to the $411 mark. Analysts also foresee that by July 2027, Microsoft could double to $571.98.  If Microsoft lives up to analysts’ expectations and achieves its goals, it might take the top spot as the world’s most valuable publicly traded company.