It feels as though Microsoft (MSFT) and perhaps the largest Tech companies are too big to be held accountable. While I much prefer MSFT CEO Satya Nadella to former CEO Steve Ballmer, nowhere on MSFT’s recent EPS call was there a single question about organic revenue growth. Acquisitions likely accounted for at least one percentage point of revenue growth if not more. 4-5% revenue growth hardly sounds as robust as the 7% revenue growth figure that Microsoft reported in its March quarter results last week.
Xandr acquisition: Microsoft acquired Xandr from AT&T on June 6th 2022 (excluding Xandr’s Direct TV business). It’s difficult to find Revenue much less EBITDA figures for Xandr pre-acquisition. I found the below figures, although they include the Direct TV business. Excluding Direct TV is it fair to assume that Xandr generated revenue of $500 million for Microsoft during the March Quarter? $600 million? $700 million? $1 billion?
- $500 million of acquired revenue = 1 percentage point of revenue growth in MSFT’s reported March quarter.
- $1 billion of acquired revenue = 2 percentage points of revenue growth in MSFT’s reported March quarter.
Nuance acquisition: Nuance generated $321 million in revenue its last quarter (December 2021 quarter) as a public company. Microsoft closed its Nuance acquisition on March 4th 2022, so that’s two months of inorganic revenue related to the Nuance deal that appeared in Microsoft’s March quarter results last week. What did Nuance generate for Revenue in that quarter? I don’t know. However, is it unrealistic to hypothesize that Xandr and Nuance combined to generate revenue of approximately $1 billion (2% of Total Revenue), in Microsoft’s March 2023 quarter? No. I believe that to be a reasonable assumption. 4-5% Total Revenue growth does not sound as robust as 7%.
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