This afternoon, Microsoft had its earnings announcement for the second quarter of their 2017 fiscal year. The results for this quarter are the first to contain results from their acquisition of Linkedin, which Microsoft purchased for $26.2 billion. For this quarter, the Non-GAAP results reflect an exclusion of the LinkedIn results, to better compare the rest of Microsoft’s earnings year-over-year, in addition to another set of Non-GAAP results which do include the LinkedIn results.
But on a GAAP basis, the numbers from LinkedIn are reported. Looking at the GAAP results, Microsoft had revenue for Q2 of $24.1 billion, up 1% from a year ago. Gross margin was 58.9%, up 0.4%, and operating income came in at $6.2 billion, up 3%. Net income for the quarter was $5.2 billion, up 4%, and earnings per share were $0.66, up 6%.
Microsoft typically defers the revenue from Windows 10 licenses over the life of the computing device, to adhere to current revenue recognition accounting guidance. Previously, a sale of Windows would be a sale of Windows, with all of the revenue for that license being accounted for right away. Microsoft is moving its guidance on this to recognize the revenue at the time of billing, rather than over the life of the device, but has not yet adopted this accounting practice, so the Non-GAAP results this, with $2.0 billion in Windows 10 revenue deferrals.
On a Non-GAAP basis, revenue was $26.1 billion, up 2%, or 4% in constant currency (CC – excluding the effect of foreign currency rate fluctuations). Excluding LinkedIn resulted in $25.8 billion, up 1%, or 3% CC. Gross margin for the quarter was 62%, up 0.7%, and excluding LinkedIn, it was 62.1%, up 0.8%. Operating income for the quarter was $8.2 billion, up 5%, and 8% CC, and excluding LinkedIn resulted in $8.4 billion, up 8% and 11% CC. Net income was $6.5 billion, up 6%, and 10% CC, with the exclusion results of $6.6 billion. Earnings per share came in at $0.83, up 9%, and 13% CC, and the results were $0.84, up 11%, and 15% CC, if you exclude LinkedIn.
Luckily, Microsoft is not expecting to break out the LinkedIn results in Non-GAAP results in the future, but for this quarter, there is quite a few extra numbers to evaluate.
