Q2'08 Earnings Beat Expectations

For the second consecutive quarter, Microsoft beat its previously stated earnings expectations by a significant margin and raised its guidance for the fiscal year. Strong sales of new PCs, business applications, and Xbox 360 games earned Microsoft US$4.71 billion on a record US$16.37 billion in revenue for the quarter ending Dec. 31, 2007 (Q2 of Microsoft’s 2008 fiscal year). Moreover, the company expressed little concern about a broader economic downturn, claiming that its breadth in products, targeted market segments, and worldwide presence will help it outperform less diverse competitors in a difficult economic climate.

(For an overview of Microsoft’s recent financial performance, see the chart “Microsoft Financials for the Last Five Quarters“.)

Segment Performance

Four of Microsoft’s five business segments outpaced the company’s revenue expectations in Q2’08. While Server and Tools fell slightly short of expectations, Microsoft said that this shortfall was due to a higher-than-expected proportion of new sales coming in the form of multiyear license agreements rather than any sales weakness.