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Microsoft Beats Analyst Expectations but Posts a Loss in 4Q15

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Fiscal 4Q15 and 2015 earnings overview

On July 21, 2015, Microsoft (MSFT) reported its fiscal 4Q15 results. The company posted revenue and non-GAAP (generally accepted accounting principles) earnings per share, or EPS, of $22.18 billion and $0.62 per share, respectively. Microsoft’s revenue and EPS beat analyst expectations by $120 million and $0.06 per share, respectively.

Although the company reported revenues of $22.18 billion, on a YoY (year-over-year) basis, revenues declined by 5.1% due to low demand for its Windows OS (operating system).

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For all of 2015, Microsoft reported revenue and non-GAAP EPS of $93.6 billion and $2.63, respectively. While 2015 revenue grew by 7.7% YoY, EPS remained flat. On a GAAP basis, Microsoft reported EPS of $1.48 in 2015, a 44% decline YoY.

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Microsoft reports $3.2 billion net loss in 4Q15

In 4Q15, Microsoft reported an operating loss and a loss per share of $2.1 billion and 40 cents per share, respectively. Microsoft announced a $3.2 billion net loss in the quarter, having booked $8.4 billion in impairment and restructuring charges. Although its operating loss turned out to $2.1 billion, Microsoft still had to pay $1.44 billion, which led to a net income loss of $3.2 billion. Microsoft had to incur $8.4 billion in the write-down of its Nokia acquisition.

At the end of the day, although Microsoft’s 4Q15 earnings results did beat analyst expectations, the firm’s stock failed to rise on account of slower growth in its cloud business.

How Microsoft’s segments performed

In fiscal 2015, Microsoft’s Commercial segment contributed more than 55% of the firm’s overall revenues. In 4Q15, on a constant-currency basis, its revenues grew to $13.5 billion, a YoY increase of 4%. Microsoft’s Devices and Consumer (D&C) segment revenues stood at $8.7 billion, a 10% YoY decline in constant-currency terms.

On July 29, 2015, Microsoft launched Windows 10. Its launch has been eagerly awaited, and it’s hoped that the new OS will revive demand in the PC market.

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Windows 10 is designed to establish a common software foundation for PCs, tablets, and smartphones. Microsoft announced a new suite of web tools in April 2015 that enable developers to modify applications for use on Apple (AAPL) devices and Google’s (GOOG) Android devices so that they can be used on Windows devices.

The strong dollar continued to impact revenue growth

The strong dollar (UUP) continued to impact Microsoft’s performance in 4Q15. Both of its operating segments saw revenues affected by ~3% as a result of currency fluctuations.

If you’re bullish on Microsoft stock, you could invest in the Technology Select Sector SPDR Fund (XLK). This ETF invests ~9.61% of its holdings in Microsoft.

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