Category: Blog  ·  Originally posted May 18, 2012  ·  Last updated August 16, 2012

Where does Microsoft make money? (Updated 2011)

THIS INFORMATION IS OUTDATED. Click here to see the updated 2012 report.

I’ve done this for Microsoft’s 2009 and 2010 fiscal years, so I may as well add 2011’s to the list.  (Microsoft’s fiscal year ends in June, so I’ll be adding 2012’s data when it becomes available.)

As before, all information in this report is taken from Microsoft’s publicly available 2011 10-K filing.  Numbers may vary slightly from past reports; for reasons I don’t fully understand, Microsoft retroactively adjusts their exact earning numbers in subsequent years.  This article uses 2009 and 2010 values as calculated in the 2011 report.  All values are in USD.

If you’ve read my report on past years (2009 or 2010) then feel free to skip down to the charts.  If this is your first time here, let me provide a quick explanation of how Microsoft breaks down its earnings.

Microsoft Total Revenue and Operating Income (June 2010 – June 2011)

Total Revenue: $69,943,000,000
Operating Income: $27,161,000,000

For those who don’t know, Total Revenue is the total amount of money Microsoft takes in from normal business operations.

Operating Income is calculated as (Operating Revenue – Operating Expenses). In other words, “Operating Income” is the profit made from normal business operations. (A more formal definition is available from Investopedia: “Operating income would not include items such as investments in other firms, taxes or interest expenses. In addition, nonrecurring items such as cash paid for a lawsuit settlement are often not included. Operating income is required to calculate operating margin, which describes a company’s operating efficiency.”)

Operating Income is particularly important when looking at a company like Microsoft.  Certain Microsoft divisions take in a great deal of money, but they also require much higher costs to operate.  Therefore, it is important to look at not just how much money a certain division brings in – but at how much it costs to operate that division.

Microsoft Revenue and Operating Income by Division (June 2010 – 2011)

Microsoft products (and earnings) are divided into five divisions: Windows & Windows Live, Microsoft Business, Server and Tools, Entertainment and Devices, and Online Services. The types of products and services provided by each segment are summarized below:

Windows and Windows Live – Windows operating system, Windows Live applications and web services, Microsoft PC hardware products.

Microsoft Business – Microsoft Office (including Office Web Apps and Office 365), Microsoft Exchange, Microsoft SharePoint, Microsoft Lync, and Microsoft Dynamics ERP and CRM.

Server and Tools – Windows Server operating system, Windows Azure, Microsoft SQL Server, SQL Azure, Visual Studio, Silverlight, Windows Intune, Windows Embedded, System Center products, Microsoft Consulting Services, and Premier product support services.

Entertainment and Devices – Xbox 360 console, games, and accessories (e.g. Kinect), Xbox LIVE, Windows Phone.

Online Services – Bing, Microsoft adCenter, MSN, and Atlas online tools for advertisers.

(Note: these divisions are roughly the same as 2010, with the following two exceptions: in 2011, Microsoft hardware products were moved from Entertainment and Devices to Windows and Windows Live.  Also, Windows Embedded device OS was moved from Entertainment and Devices to Server and Tools.)

The 2010-2011 Revenue and Operating Income for each division, in USD, is as follows:

Windows and Windows Live
Revenue: $19,024,000,000
Operating Income: $12,281,000,000

Business (Office, Exchange, SharePoint)
Revenue: $22,186,000,000
Operating income: $14,124,000,000

Server and Tools (Windows Server, Microsoft SQL, Visual Studio)
Revenue: $17,096,000,000
Operating Income: $6,608,000,000

Entertainment and Devices (XBox 360/LIVE, Windows Phone)
Revenue: $8,913,000,000
Operating income: $1,324,000,000

Online Services (Bing, MSN, Hotmail)
Revenue: $2,528,000,000
Operating income: $-2,557,000,000


Total Revenue Charts

Microsoft revenue by division (raw values)

Microsoft total revenue by division in 2011. (Amounts in millions USD.)

 

Microsoft revenue by division (percentages)

Microsoft total revenue by division for 2011, as percentages. Note that in terms of pure revenue, Microsoft Business outperformed every other division.


Operating Income Chart

Microsoft operating income by division

Microsoft operating income, by division, for 2011. (Amounts in millions USD.) Note that Online Services represents a $2.5 billion dollar LOSS. Also note that Microsoft Business remained the most profitable division, while Server and Tools - which brought in almost as much revenue as the Windows division in 2011 - represented significantly less profit overall.


Year-over-year comparisons (2009-2011)

Microsoft revenue by division (2009-2011)

Microsoft revenue by division for the years 2009, 2010, and 2011. Overall revenue increased slightly in 2010 and dramatically in 2011, but the overall percentage represented by each division did not change by an appreciable amount.

 

Microsoft operating income by division (2009-2011)

Microsoft operating income by division for the years 2009, 2010, and 2011. Unlike revenue, operating income varies dramatically from year to year. Microsoft Business dominated profits in 2011, while Online Services continued to hemorrhage a frightening amount of money. It's also worth noting that while Entertainment and Devices represents a small amount of Microsoft's total profit, that division doubled in profitability from 2010 to 2011.

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