Microsoft stock stagnates despite better-than-expected earnings and strong Azure growth – TechCrunch

Today, after the bell, Microsoft announced its third quarter 2020 calendar results, the period that matches its first quarter 2021 fiscal period. In the three months ending September 30, Microsoft had revenue of 37 .2 billion and earnings per share of $1.82.

Analysts had expected the company to report $1.54 in earnings per share, generated from $35.72 billion in revenue.

In the aftermath of the beat, the company’s shares are effectively flat, gaining only a fraction of a point in after-hours trading. Microsoft was up nearly 2% in afternoon trading, despite somewhat uneven markets.

Azure’s all-important update helped boost Microsoft’s stock price movement. Here’s what Microsoft had to say:

Server products and cloud services revenue increased 22% (up 21% in constant currency) driven by Azure revenue growth of 48% (up 47% in constant currency)

Analyzing investor sentiment, it seems most were expecting a number closer to the 40s, which makes the Azure result a strong number.

The broader category that Azure falls into, called “Intelligent Cloud,” reported revenue of $13 billion, up 20% from the year-ago quarter. It was the top performer of Microsoft’s three units, which also include the Productivity and Business Processes group with Office and LinkedIn, which recorded revenue of $12.3 billion – up 11 % – and the “More personal” group with Windows and Xbox. Computing,” which generated revenue of $11.8 billion, up 6% from the prior year quarter.

For the financial morons in the audience, I’ve caught the following for your viewing pleasure:

Other highlights from a first reading of the company’s earnings report include:

• Strong Surface turnover, up 37% over the prior year period
• Bing revenue dropswith the company saying that “[s]ad revenue excluding traffic acquisition costs was down 10%”
• Commercial cloud revenue of $15.2 billion, up 31% from the previous year
• LinkedIn managed 16% revenue gains in the quarter
• Gaming revenue 22% year-over-year gains
• Consumer PC Application – seen in PC sales figures – increased non-Pro Windows OEM revenue by 31% over the prior year quarter, although Pro-focused Windows OEM revenue fell 22% . These partial results resulted in an OEM figure of -5% for the company.

Looking ahead, analysts expect Microsoft to report earnings per share of $1.60 in the current quarter, against $40.4 billion in total revenue. The company will announce its own projections during its earnings call.

Update: I phoned Mike Spencer from Microsoft’s IR team to discuss the results. I was curious about the impact of the COVID-related advertising declines on the business. Spencer said Bing and LinkedIn have recovered from earlier lows and both exceeded internal expectations. For LinkedIn, of course, it was a better bottom line than Bing, comparing their numbers year over year, but beating expectations is always good. You can read as much as you will about what the Bing numbers will mean for Google.

Spencer pointed to the Azure number — ahead of internal and external expectations — and the non-Pro Windows OEM number as notable numbers in the report. Agreed. The first shows Microsoft standing up to Amazon and Google, while the second shows that when people buy computers for their toddlers at home, they’re not just buying Chromebooks.