Volume Licensing Strong in Q4'06

Strong sales and renewals of multiyear license agreements and better-than-expected PC sales helped Microsoft turn in 16% year-over-year revenue growth in the quarter ending June 30, 2006 (Q4’06), the company’s best quarterly revenue performance in two years. Operating income, which measures revenue minus the normal costs of doing business, also grew 30% over last year, to US$3.88 billion (although net income dropped because of an abnormally low tax rate in the previous year’s quarter). Microsoft also announced plans to buy back up to US$20 billion worth of stock and gave more details about expected expenses for FY’07.

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

Core Businesses Shine

All seven of Microsoft’s business segments met or exceeded revenue expectations announced last quarter, but costs increased significantly in Home and Entertainment and MSN, leading to bigger losses in these segments. (For a chart detailing the results of each business unit, see “Revenue and Profit (Loss) by Business Segment“.)