Redmond, Wash. – Oct 28, 2010 – Microsoft Corp. today announced record first-quarter revenue of $16.20 billion for the quarter ended Sept. 30, 2010, a 25% increase from the same period of the prior year. Operating income, net income and diluted earnings per share for the quarter were $7.12 billion, $5.41 billion and $0.62 per share, which represented increases of 59%, 51% and 55%, respectively, when compared with the prior year period.

Prior year results reflect the deferral of $1.47 billion of revenue, an impact of $0.12 of diluted earnings per share, relating to the Windows 7 Upgrade Option program and sales of Windows 7 to OEMs and retailers before general availability in October 2009. Without the deferral in the prior year, first-quarter growth rates for revenue and operating income were 13% and 20%, and growth in net income and earnings per share were 16% and 19%, respectively.

“This was an exceptional quarter, combining solid enterprise growth and continued strong consumer demand for Office 2010, Windows 7, and Xbox 360 consoles and games,” said Peter Klein, chief financial officer at Microsoft. “Our ability to grow revenue while continuing to control costs allowed us to deliver another quarter of year-over-year margin expansion.”

During the quarter, Microsoft saw year-over-year growth across all business segments. Among the highlights are these:

Office 2010 is off to a fast start with revenue growing over 15% in its first full quarter in market.
Microsoft continues to see a healthy and sustaining business PC refresh cycle.
Xbox 360 consoles grew 38%, outselling every competing console in the U.S. for each of the past four months.
For yet another quarter, Bing continued to grow market share, while achieving major milestones in implementing Microsoft’s partnership with Yahoo.

“We are seeing improved business demand and adoption. Our enterprise agreement rates were strong, reflecting business commitment to Windows 7, Office 2010, and our server and database products,” said Kevin Turner, chief operating officer at Microsoft. “Customer demand and excitement for our cloud and commercial online services continue to grow as demonstrated by major new customer wins this quarter for Windows Azure and by the significant customer interest in our recently announced Office 365 service.”

Business Outlook

Microsoft reaffirms operating expense guidance of $26.9 billion to $27.3 billion for the full year ending June 30, 2011.