During fourth-quarter 2016, Microsoft Corp. ( MSFT ) reported net income of $5.2 billion and diluted earnings per share of 66 cents on an as-reported basis. Adjusting for Windows 10 revenue deferrals, net income increased to $6.515 billion while earnings per share climbed to 83 cents. Both performance figures outperformed comparative values for fourth-quarter 2015, suggesting Microsoft had a strong final quarter of 2016 and expects a good financial outlook for 2017.
Brief summary of earnings report
For the three months ending Dec. 31, 2016, Microsoft reported revenue of $24.1 billion and operating income of $6.2 billion based on generally accepted accounting principles. These figures represent a year-over-year increase of 1% and 3% respectively. GAAP net income increased 4% year-over-year while GAAP earnings per share climbed 6% year-over-year.
CEO Satya Nadella praised the company for delivering good value and opportunities as Microsoft "partners with [their customers] through [the customers'] digital transformation." Artificial intelligence ( AI ) advancements further provides opportunities for the company to drive growth in the Microsoft Cloud.
The AI advancements contributed to higher Intelligent Cloud revenues, which increased to $6.9 billion during the quarter. Double-digit annuity revenue growth increased cloud services revenues, and Microsoft Azure revenues sharply increased as the number of Azure users doubled year-over-year.
Productivity and Business Products revenues increased to $7.4 billion during Microsoft's fiscal second-quarter 2017 as office commercial products, office consumer products and dynamic products increased 5%, 22% and 7% respectively as the number of Office 365 customers increased to 24.9 million. LinkedIn Corp. (NYSE:LNKD) added $228 million in revenue for the period beginning Dec. 8, 2016, the closing date of the acquisition.
Company has strong financial outlook
The Washington-based software company has a financial strength rank of 6 and a profitability rank of 8, both suggesting a strong financial outlook for early 2017. The company's operating margin , net margin and return on equity outperform over 85% of global infrastructure companies. Microsoft's Piotroski F-score ranks 6 out of 9, and its Altman Z-score of 3.37 suggests the company seldom faces financial distress.
Chief Financial Officer Amy Hood cherished the company's fiscal second-quarter results, observing "strong demand for [Microsoft's] cloud-based services" and good long-term growth strategy execution. The company returned $6.5 billion to shareholders in share repurchases and dividends during the quarter, contributing to high share-buyback ratios and trailing dividend yields. The former outperforms 92% of competitors while the latter ranks in the top 1% of global infrastructure companies.
During fourth-quarter 2016, three gurus expanded their positions in Microsoft. Spiros Segalas (Trades, Portfolio) increased his position 32.04%, adding 3,474,268 shares at an average price of $60.15. Manning & Napier Advisors Inc. added 3.53% while Ken Fisher (Trades, Portfolio) tacked on 0.43%.
Disclosure: No postion in the stocks mentioned.
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