Company results:
· Revenue was $28.9 billion and increased 12%
· Operating income was $8.7 billion and increased 10%
· GAAP net loss was $(6.3) billion and non-GAAP net income was $7.5 billion
· GAAP diluted loss per share was $(0.82) and non-GAAP diluted earnings per share was $0.96
· GAAP results include a $13.8 billion net charge related to the Tax Cuts and Jobs Act (TCJA)
More Personal Computing:
Gaming:
Xbox Hardware revenue ~ 1.46bn
Early after hour trading:
Recent Tax Legislation:
Outlook and Conference Call quotes:
Q&A
sources:
https://www.microsoft.com/en-us/Investor/earnings/FY-2018-Q2/press-release-webcast
https://www.sec.gov/Archives/edgar/data/789019/000156459018001129/msft-10q_20171231.htm
last quarter:
https://www.resetera.com/threads/mi...2018q1-xbox-live-users-13-to-53-million.1425/
· Revenue was $28.9 billion and increased 12%
· Operating income was $8.7 billion and increased 10%
· GAAP net loss was $(6.3) billion and non-GAAP net income was $7.5 billion
· GAAP diluted loss per share was $(0.82) and non-GAAP diluted earnings per share was $0.96
· GAAP results include a $13.8 billion net charge related to the Tax Cuts and Jobs Act (TCJA)
Of couse they do.
MPC division made $2.51bn profit (20.6% profit margin)
IC division made $2.83bn profit (36.3% profit margin)
P&B divison made $3.34bn profit (37.3% profit margin)
More Personal Computing:
Revenue increased $281 million or 2%, primarily due to higher revenue from Gaming and Search advertising, offset in part by lower revenue from phones.
Operating income decreased $51 million or 2%, primarily due to an increase in operating expenses.
• Gross margin was relatively unchanged, driven by a decline in Gaming, offset by an increase in Search advertising and Surface. Gross margin percentage decreased, primarily due to a gross margin percentage decline in Gaming.
• Operating expenses increased $49 million or 2%, driven by investments in engineering and the benefit of a legal settlement in the prior year, offset in part by a decrease in Windows marketing and phone expenses.
Gaming:
Xbox Software & Service revenue ~ 2.46bnGaming revenue increased $303 million or 8%, driven by higher revenue from Xbox hardware and Xbox software and services. Xbox hardware revenue increased 14%, primarily due to the launch of Xbox One X. Xbox software and services revenue increased 4%, primarily due to Xbox Live revenue growth, offset in part by a decrease in revenue from the prior year launch of video games.
Xbox Hardware revenue ~ 1.46bn
Early after hour trading:
Recent Tax Legislation:
On December 22, 2017, the TCJA was enacted into law, which significantly changes existing U.S. tax law and includes numerous provisions that affect our business, such as imposing a one-time transition tax on deemed repatriation of deferred foreign income, reducing the U.S. federal statutory tax rate, and adopting a territorial tax system. The TCJA requires us to incur a one-time transition tax on deferred foreign income not previously subject to U.S. income tax at a rate of 15.5% for foreign cash and certain other net current assets, and 8% on the remaining income. The TCJA also reduces the U.S. federal statutory tax rate from 35% to 21% effective January 1, 2018. For fiscal year 2018, our blended U.S. federal statutory tax rate is 28%. This is the result of using the tax rate of 35% for the first and second quarter of fiscal year 2018 and the reduced tax rate of 21% for the third and fourth quarter of fiscal year 2018. The TCJA includes a provision to tax global intangible low-taxed income ("GILTI") of foreign subsidiaries and a base erosion anti-abuse tax ("BEAT") measure that taxes certain payments between a U.S. corporation and its subsidiaries. The GILTI and BEAT provisions of the TCJA will be effective for us beginning July 1, 2018.
The TCJA is effective in the second quarter of fiscal year 2018. As of December 31, 2017, we have not completed our accounting for the tax effects of the TCJA. During the quarter, we recorded a provisional net charge based on reasonable estimates for those tax effects. The provisional net charge is subject to revisions as we complete our analysis of the TCJA, collect and prepare necessary data, and interpret any additional guidance issued by the U.S. Treasury Department, Internal Revenue Service ("IRS"), FASB, and other standard-setting and regulatory bodies. Adjustments may materially impact our provision for income taxes and effective tax rate in the period in which the adjustments are made. Our accounting for the tax effects of the TCJA will be completed during the measurement period, which should not extend beyond one year from the enactment date. The impacts of our estimates are described further below.
During the second quarter of fiscal year 2018, we recorded an estimated net charge of $13.8 billion related to the TCJA, due to the impact of the one-time transition tax on the deemed repatriation of deferred foreign income of $17.8 billion, offset in part by the impact of changes in the tax rate of $4.0 billion, primarily on deferred tax assets and liabilities.
We recorded an estimated $17.8 billion charge related to the transition tax, which was included in provision for income taxes on our consolidated income statements and income taxes on our consolidated balance sheets. We have not yet completed our accounting for the transition tax as our analysis of deferred foreign income is not complete. To calculate the transition tax, we estimated our deferred foreign income for fiscal year 2017 and the first and second quarter of fiscal year 2018 because these tax returns are not complete or due. The fiscal year 2017 and fiscal year 2018 taxable income will be known once the respective tax returns are complete and filed. In addition, U.S. and foreign audit settlements may significantly impact the estimated transition tax. The impact of the U.S. and foreign audits on the transition tax will be known as the audits are concluded.
In addition, we recorded an estimated $4.0 billion benefit from the impact of changes in the tax rate, primarily on deferred tax assets and liabilities, which was included in provision for income taxes on our consolidated income statements and deferred income taxes on our consolidated balance sheets. We remeasured our deferred taxes to reflect the reduced rate that will apply when these deferred taxes are settled or realized in future periods. We have not yet completed our accounting for the measurement of deferred taxes. To calculate the remeasurement of deferred taxes, we estimated when the existing deferred taxes will be settled or realized. The remeasurement of deferred taxes included in our financial statements will be subject to further revisions if our current estimates are different from our actual future operating results.
The TCJA subjects a U.S. corporation to tax on its GILTI. Due to the complexity of the new GILTI tax rules, we are continuing to evaluate this provision of the TCJA and the application of GAAP. Under GAAP, we can make an accounting policy election to either treat taxes due on the GILTI inclusion as a current period expense, or factor such amounts into our measurement of deferred taxes. We elected the deferred method and recorded an estimated $454 million benefit related to GILTI, which is included in the net charge related to the TCJA.
Outlook and Conference Call quotes:
Satya Nadella CEO said:Our new Xbox One X was the top selling premium console this holiday in the U.S., and we saw strong sales of the Xbox One S. We will continue to innovate in console to attract high value gamers who want immersive, 4K experiences, to build a broader subscription service with Game Pass, and to extend our services to all the devices in our customers' lives across console, PC and mobile.
Our decision to release exclusive game content on Xbox Game Pass simultaneous with global release increases the value of the subscription for members and our partners, and we are off to a good start.
We grew gamer engagement again this quarter with 59 million monthly active Xbox Live members, record usage of our Xbox Live services, record viewers of our new streaming service, Mixer, and record Minecraft users.
Finally, we just acquired PlayFab, which serves more than 700 million gamers with more than 1200 games from companies like Disney, Rovio and Atari. It's a complete backend platform for mobile/PC/console game developers to build, launch, and scale cloud-connected games, extending our investments in Azure to provide a world-class cloud platform for the gaming industry.
Amy Hood CFO said:In Gaming, we expect revenue growth similar to last quarter but with a revenue mix shift to software and services and continued year-over-year growth of our Xbox Live user base.
Q&A
KEITH WEISS Morgan Stanley said:Excellent. Thank you, guys, for taking the question. Again, a really solid quarter. And, Chris, it's been great working with you. Sorry to see you go from this role.
As to my questions, one question for Satya, and starting a little narrow and maybe running it out from there, gaming in the quarter, you had a good quarter for gaming with the Xbox launch. But more broadly, there's some murmurings out there about Xbox falling behind PlayStation if you look at sort of the bases of those two consoles, there's murmurings about not having enough kind of exclusive games on the console.
I know you sort of mixed up the leadership a little bit there. How do you feel about your positioning in gaming from a narrow focus, and then more broadly how are you guys feeling about your position in the home, if you will? When I go home, I'm talking to Alexa, not talking to Cortana. Is that something that you're comfortable where we are today, is that something we should see improving on a going forward basis?
SATYA NADELLA said:Thanks, Keith.
So let me take both of those questions. So on gaming, we feel good about Xbox One X, the premium console launch. We also feel good about the volume we got for Xbox One S, because we always wanted that halo effect of the premium console driving even the lower end console, because that creates the sockets for gaming for us.
But our real strategy going forward is not only to do great work on the console, but to complement that with the work we're doing on the PC. PC gaming is a growth market, and so therefore you see us, whether it's our subscription offer, whether it's our streaming efforts that are increasingly bringing the console plus PC together.
And then not stopping there but going to other devices, for example, mobile. Minecraft on Mobile we just launched, in fact, in the last quarter in China. We are seeing tremendous growth of Minecraft expansion on mobile platform in China. So overall, you'll see us do good work on console. We'll compete there, but more importantly we have a much more broader gaming view in terms of what value we can add with our subscription services, streaming services across all devices.
And one other point I think I made in my remarks earlier is, gaming also is a growth area for Azure. In other words, we have now increasing PaaS services that we are going to reinforce on Azure and attract more game developers. Some of the know-how that we have from Xbox is not just about the Xbox, but it's going to help developers across the board. So that I think will also transcend or lead into even media companies. So we are very excited about some of what we can get out of our investments in gaming. So that's our focus on gaming.
[...]
sources:
https://www.microsoft.com/en-us/Investor/earnings/FY-2018-Q2/press-release-webcast
https://www.sec.gov/Archives/edgar/data/789019/000156459018001129/msft-10q_20171231.htm
last quarter:
https://www.resetera.com/threads/mi...2018q1-xbox-live-users-13-to-53-million.1425/
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