Net profit rose 13% from $47.4m to $53.4m.

Income tax expense was $17.9m from the year-ago $15.4m.

The cost of sales was reported as $1.36b.

A $45.0m dividend was paid to its parent company.

The past year has seen Microsoft NZ back down on two controversies.

One was the end of security upgrades for Windows 10 unless a customer paid $50.40 per computer to join an “extended upgrade programme” – a development that drew criticism from Consumer NZ and others. In the end, Microsoft provided most customers with an avenue to keep getting Windows 10 updates for free until October 2026.

Another was Microsoft 365 price increases of up to 38% as the company’s Copilot artificial intelligence (AI) assistant was added to the software suite – with an option to remain on the old pricing, minus Copilot, hidden unless a customer went to cancel their subscription. After court action from Australia’s market regulator (which is ongoing) and a warning letter from New Zealand’s Commerce Commission, Microsoft offered refunds.

The local operation’s success reflects Microsoft’s global fortunes. On October 30, Microsoft Corp reported an 18% revenue jump to US$77.7b ($134b) for its September quarter as demand for AI services boosted its cloud computing business as net profit rose 12% to $27.7b.

While its partnership with OpenAI (in which Microsoft holds a 27% stake) helped fuel revenue growth, related losses of US$3.1b from the investment in the ChatGPT maker impacted net income for the quarter.

Threat of tax on revenue melts away

In May, Revenue Minister Simon Watts discharged the Digital Services Tax Bill (introduced to the house under the Labour Government), which would have levied a flat 3% tax on Big Tech firms’ New Zealand revenue.

“We have been monitoring international developments and have decided not to progress the Digital Services Tax Bill at this time,” Watts said.

“A global solution has always been our preferred option, and we have been encouraged by the recent commitment of countries to the OECD work in this area.”

Earlier this year, US President Donald Trump said he did not support the OECD’s push to implement a global minimum corporate tax.

Former Finance Minister Grant Robertson first floated the idea of a 3% or 6% DST in 2019 but then put it on the backburner for most of the next four years.

The Digital Services Tax Bill (for a 3% tax) was introduced in the final days of Parliament before the 2023 election. It didn’t have time to get to a select committee, let alone pass.

Ahead of the 2023 election, the Ministry of Foreign Affairs and Trade warned that a digital services tax would raise less than $100m, with that amount likely to be lost to retaliatory tariffs and measures against cloud software firms like Xero who sell into the US market.

Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.