Microsoft Outperforms Analysts Estimates For the Quarter

After a report that the company’s quarterly earnings and guidance are better than expected, Microsoft stock rose 2 percent. 

Looking more closely at the numbers, Microsoft reported earnings of $1.37 per share, excluding specific items, against expectations of $1.21 per share.  Also, Microsoft reported revenue of $33.72 billion against analyst expectations of $32.77 billion.

Taking the fiscal 2019 year into consideration, Microsoft saw annualized basis revenue grow by 12 percent in the fourth quarter (ending June 30).  This marks the ninth straight quarter registering double-digit annualized revenue growth.  In addition, Microsoft shares have steadily climbed—up 34 percent on year—to push the company over the $1 trillion market capitalization thanks to bets that CEO Sataya Nadella would stabilize the cloud business to compete with Amazon. 

Breaking this apart again, though, the Intelligent Cloud business segment of Microsoft—including Azure public cloud, SQL server, GitHub, Visual Studio, Windows Server, and consulting services—produced nearly $11.4 billion in revenue for this quarter.  Some analysts had expected to see only $11.02 billion in this Intelligent Cloud revenue. 

Concurrently, Azure Cloud server revenue has increased 64 percent on the year, so far.  That is actually the lowest growth rate for the company in the last four years, at least. Of course, Microsoft has not disclosed exact revenue figures for Azure but the company has revealed a greater large and long-term Azure contracts for the quarter. This appears to be a stable line with previous quarters. 

On the other side of things, Microsoft’s More Personal Computing segment—which houses Xbox, Surface, and Windows OS—closed the same quarter with nearly $11.3 billion in revenue.  Analysts had originally expected to see only $10.99 billion. Additionally, Microsoft’s Productivity and Business segment—which includes Office, Dynamics, and LinkedIn—registered $11.05 billion in revenue for the quarter. That was also more than the $10.7 billion some analysts had estimated. 

Finally, Microsoft also seems to have outperformed in its legacy-computing business.  Analysts had first estimated PC revenue, for example, would reach $10.99 billion while Microsoft projected between $10.8 and $11.1 billion. Sure enough, this sector grew from $10.81 billion, in the same quarter last year, to $11.3 billion this year.  As a matter of fact, Microsoft says this could have been better, if not for a 10 percent decline in the Xbox-based gaming business for the quarter, and an overall 48 percent decline in Xbox hardware sales.