Microsoft Shares Closed 4% Up On Better Than Expected Earnings

Let the earnings season continue, Microsoft shares gained 5 percent today after its results beat Wall Street expectations.

Revenue stood at $22.33 at 76 cents per share versus expectations of $21.71b at 68 cents per share. Azure, Microsoft’s major Cloud platform saw a revenue growth of 116 percent. For the fiscal first quarter, the entire intelligent cloud segment brought in $6.38 billion in revenue, better than a FactSet analyst consensus estimate of about $6.27 billion.

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Here’s a quick breakdown;

  Revenue was $20.5 billion GAAP, and $22.3 billion non-GAAP

  • Operating income was $5.2 billion GAAP, and $7.1 billion non-GAAP
  • Net income was $4.7 billion GAAP, and $6.0 billion non-GAAP
  • Diluted earnings per share was $0.60 GAAP, and $0.76 non-GAAP

Revenue in Intelligent Cloud grew 8% (up 10% in constant currency) to $6.4 billion, with the following business highlights:

  • Server products and cloud services revenue increased 11% (up 13% in constant currency) driven by double-digit annuity revenue growth
  • Azure revenue grew 116% (up 121% in constant currency) with Azure compute usage more than doubling year-over-year
  • Enterprise Services revenue increased 1% (up 2% in constant currency) with growth in Premier Support Services and consulting offset by declines in custom support agreements

While Cloud services grew, revenue from personal computing was down 2 percent to $9.3 billion. This doesn’t come as a surprise even as two separate IDC reports on PC shipments this year showed that it was on the decline. Users are now holding on to their machines a little longer even though analysts believe Windows 10 could still boost shipment in future.

Revenue from phone declined 72 percent and this is also not surprising as Microsoft hasn’t released any new phones and is in fact not focusing much on that just yet. When Microsoft announced that it would be laying off 7,800 staff, their phone unit was the hardest hit.

Gaming revenue was also down driven by lower Xbox console revenue offset by higher Xbox software and services revenue but advertising revenue grew 9 percent.

Concluding, Microsoft announced that it expects the $26.2b LinkedIn acquisition deal to be completed in the second quarter of fiscal year 2017, subject to regulatory approvals and other closing conditions. Microsoft is seeking an EU ratification of that deal too.  While that acquisition should be concluded at that time, they also expect to sell of entry-level feature phone business.

Microsoft’s bigger push into Cloud and enterprise solutions seem so to be paying off as this report shows. Through acquisitions like LinkedIn and partnerships like the one with Adobe on enterprise Cloud solutions, Microsoft expects even a better revenues in future reports.

Microsoft shares closed 4 percent higher on a better than expected earnings report.

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