For Q1 2022 (ended Sep 2021), Microsoft reported $45.3 billion in revenue, up 22% y-o-y. Operating income was $20.2 billion, up 27% y-o-y and Net income was $20.5 billion, up 48% compared to the previous year. Revenue in Productivity and Business Processes was $15 billion up 22% y-o-y. Revenue in Intelligent Cloud was $17 billion up 31% y-o-y. Revenue in More Personal Computing was $13.3 billion up 12% y-o-y.
IT software and Services industries are suffering from a fall in demand for software and web services as consumers are focusing solely on essentials and not discretionary products. That said, the industry has seen companies with a portfolio of software as well as services aimed at remote collaboration benefit due to the growing number of people globally. Many companies are also operating with employees working remotely from their own home.
Microsoft announces definitive agreement to acquire Metaswitch Networks with a view to expand approach to empower operators and partner with network equipment providers and deliver on promise of 5G. The acquisition builds on the company's recent acquisition of Affirmed Networks, which closed on April 23, 2020. The convergence of cloud and communication networks is expected to present a unique opportunity for Microsoft to serve operators globally via continued investment in Azure.
Below are key drivers of Microsoft's value that present opportunities for upside or downside to the current Trefis price estimate for Microsoft:
Microsoft makes money primarily through the sale of software server licenses, business productivity, and operating system software. Microsoft's business productivity software suite, known as MS Office, is used for word processing, spreadsheet preparation, presentations and email. MS Office is sold primarily to businesses worldwide. Microsoft's operating system software, known as Windows, is sold primarily to PC manufacturers (such as Dell, HP, Acer), which sell Windows-based PCs to consumers and businesses. Its Server software includes MS SQL Server and Windows Server that is sold to application development companies.
We believe Productivity services and Intelligent cloud are the most valuable segments of Microsoft for the following reasons:
Microsoft Office has a higher market share in the productivity market compared to the market share Windows OS has in the PC market. Even if users use Mac OS X over the Windows OS for their personal computing needs, Microsoft's Office Suite is still one of the best available productivity suites on the platform. Even as more competition enters the productivity software industry, we still think that Office is substantially better than competing products.
Due to increase in Internet penetration, business activity on the Internet, big data analytics has come to fore. As a result, popularity of cloud services (IaaS, PaaS) and SQL server is on the rise. Furthermore, Microsoft's Azure platform has resulted in an increase in sales of its virtualized version of its Windows server. The work from home order due to the covid pandemic has increased the company's cloud services demand.