Microsoft showed Superior Business Performance in FY2022

Microsoft Corporation (NASDAQ: MSFT) announced its 2022 Q4 financial results on July 26, 2022. According to the announcement, total revenue, operating income and net income were up 18%, up 19% and up 19%, respectively (YoY, GAAP, TTM). In this regard, product revenue was up 2%, while service and other revenue was up 29% (YoY, TTM). Service and other revenue accounts for 63% of the total revenue (TTM). In addition, net cash from operations was up 16% while free cash flow (FCF) was up 7% (YoY, TTM). Moreover, the FCF margin recorded 15%.

In these days, Microsoft’s PSR is generally around 10. Thus, it cannot be said that the stock price level is excessive at this moment. Microsoft has the higher growth rate in service and other revenue, with subscription revenue at over 65% of the total revenue in 2022 Q4 alone. We believe that the shift from the product business to the service business would significantly improve the cash flow of Microsoft. This would bring the significant improvements of Microsoft’s overall financial structure.

Reviewing by product, Azure and other cloud services revenue showed the highest growth of up 40% (3 months, YoY). It was followed by Dynamics 365 of up 31%. In contrast, the lowest growth was Xbox content and services of down 6%.

In Microsoft, cloud-based and AI-based businesses maintain high revenue growth potential. These businesses have fewer needs for additional fixed asset investment in addition to the initial investment. Once these businesses achieve surplus, it is possible that segment income increases significantly.

Watanabe & Brothers’ Investment will continue to invest in Microsoft Corporation.

Microsoft Corporation (NASDAQ: MSFT) Stock Chart

Important Notice 

  1. Watanabe & Brothers’ Investment is holding shares of Microsoft Corporation.
  2. This report is provided solely for informational purpose and not intended for the purpose of soliciting investment in, or as a recommendation to purchase or sell any specific products. 
  3. Any opinions or statements expressed in this report are based on the author’s personal and subjective views, and are not the official views of the organization to which the author belongs.  In addition, although we have done our best efforts in making accurate assessments on the original financial statements, we cannot guarantee any complete accuracy of this report. We do not guarantee either that any future forecasts referred to in this report will certainly be realized. Investment in listed stocks, ETFs, etc. should be carried out under the responsibility of each investor, and even if the investor who read this report suffers a loss due to investment activities, Watanabe & Brothers’  Investment is not responsible for any liability.
  4. This report was originally prepared in English, and translated into the other languages with plugin utilizing Google Translation API. We hereby notify that the translations are provided only for the sake of reference, and any opinions or statements in this report should be interpreted in original English. We ask any investors reading this report to refer to the original financial statements issued by the company.
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