Microsoft (NASDAQ: MSFT) announced its 2022 Q3 financial results on April 26, 2022. According to the announcement, total revenue, operating income and net income were up 18%, 19% and 8%, respectively (3 months, YoY, GAAP). In addition, diluted EPS was up 9% (3 months, YoY, GAAP). On the other hand, the free cash flow (FCF) was down 11% (YoY, 3 months). The FCF margin was 16%. Microsoft’s earnings structure in terms of the revenue growth and FCF margins has deteriorated since 2022 Q2. However, it still remains under good conditions.
Looking at revenue growth by segment, the product segment was up 3%, while the service and the others segment was up 29% (3 months, YoY). In this regard, the revenue of service segment accounted for 65% of the total revenue. As for revenue growth by product / service, Azure and other cloud services had the highest growth of up 46% (3 months, YoY). It was followed by Dynamics 365 of up 35% and LinkedIn of up 34%.
In the midst of rising industrial prices and the increasing risks in the supply chain due to the COVID-19 pandemic as well as the Ukrainian Crisis, Microsoft is becoming more dependent on the service segment. It seems to have made Microsoft more tolerant of rising risks. Considering these factors in addition to the current business performance, Watanabe & Brothers’ Investment will continue to invest in Microsoft from a long term perspectives.
- Watanabe & Brothers’ Investment is holding shares of Microsoft Corporation.
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