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Microsoft
Shares are trading higher after the software giant reported better-than-expected quarterly results. The company has shown strength across the board, including the accelerated adoption of cloud computing.
For its second fiscal quarter ended Dec. 31, Microsoft (ticker: MSFT) reported revenue of $43.1 billion, up 17% from a year ago, with profits of $2 $.03 per share, up 34%. That easily topped Wall Street’s consensus forecast for revenue of $40.2 billion and earnings of $1.64 per share.
“What we have witnessed over the past year is the dawn of a second wave of digital transformation sweeping across all businesses and sectors,” CEO Satya Nadella said in a statement. “Developing their own digital capability is the new currency that drives resilience and growth in every organization.”
CFO Amy Hood added that “accelerating demand for our differentiated offerings drove commercial cloud revenue to $16.7 billion, up 34% year-over-year.”
Microsoft’s quarterly games revenue topped $5 billion for the first time, driven by an 86% growth in hardware revenue for the Xbox, reflecting the launch of a new generation of games consoles.
The company saw business ramp up from the September quarter across all three product segments, where revenue also beat forecasts.
Sales in the Productivity and Business Processes segment (which includes Office and LinkedIn) were $13.4 billion, up 13%, and above the indicative range of $12.75 billion to $13 billion of dollars.
For Intelligent Cloud, which includes the Azure cloud platform, sales were $14.6 billion, up 21%, well above the forecast range of $13.55 billion at 13, $8 billion. Azure revenue grew 50%, compared to 48% growth in the September quarter.
Sales in the More Personal Computing segment, which includes Windows and Surface tablets and computers, were $15.1 billion, up 14%, well above the company’s estimate of 13.2 billion to $13.6 billion. This includes a 40% increase in Xbox content and services.
Surface revenue slowed in the quarter to 3% growth from 37% in the September quarter; the company said the slowdown largely reflects the timing of product launches a year ago and that it would make sense for investors to look at Surface’s revenue in the two quarters combined.
Microsoft said it returned $10 billion to holders during the quarter, including $6.5 billion in share buybacks. The company ended the quarter with $132 billion in cash, cash equivalents and short-term investments, offset by $55 billion in long-term debt.
In a conference call with investors, Chief Financial Officer Hood said the company expects March quarter revenue in the productivity and business process segment to be between $13.35 billion. and $13.6 billion. Smart cloud revenue is expected to be between $14.7 billion and $14.95 billion. Personal computing revenue is expected to be between $12.3 billion and $12.7 billion. At the top of the range for each segment, revenue for the quarter would be $41.25 billion, well ahead of Street’s consensus of $38.7 billion. Hood also said the company expects double-digit gains in revenue and operating profit for the full fiscal year ending June 2021.
For its quarter ended Sept. 30, Microsoft posted a 12% revenue gain to $37.2 billion, with earnings of $1.82 per share.
In today’s regular session, Microsoft closed 1.2% higher at $232.33, giving the company a market value of $1.77 trillion, higher than any company other than
Apple
(AAPL). The stock is up 41% over the past 12 months.
In late trading Tuesday, Microsoft was up another 4.8% to $243.50.
Write to Eric J Savitz at eric.savitz@barrons.com
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