Microsoft provides cautious outlook even if Azure growth exceeds earnings expectations

Key Facts

• Microsoft outperformed on both the top and bottom lines due to stronger-than-expected Azure cloud growth.
• The software manufacturer closed its largest-ever purchase during the quarter when it acquired Activision Blizzard, a publisher of video games.

Tuesday’s extended trading saw a 2% decrease in Microsoft shares as the software company reported fiscal second-quarter earnings that above analysts’ projections and provided a cautious prognosis for quarterly sales.

Here’s how the business fared in comparison to the consensus of analysts surveyed by LSEG (Refinitiv):

• Earnings per share: $2.93 compared to the estimated $2.78 per share
• Revenue: $62.02 billion vs the anticipated $61.12 billion

Microsoft requested revenue for the third quarter of its fiscal year in the range of $60 billion to $61 billion, or $60.50 billion at the midpoint. LSEG surveyed analysts, and they predicted $60.93 billion. According to StreetAccount’s survey of analysts, the company’s operational costs and cost of revenue for the quarter are predicted to be lower than projected.

According to a release, Microsoft’s revenue for the quarter ending December 31 climbed 17.6% year over year. From $16.43 billion, or $2.20 per share, to $21.87 billion, or $2.93 per share, net income climbed.

Revenue from the company’s Intelligent Cloud division was $25.88 billion, up 20% over the $25.29 billion analysts surveyed by StreetAccount. Azure cloud infrastructure, SQL Server, Windows Server, Nuance, GitHub, and enterprise services are all included in this class.

Revenue from Azure and other cloud services increased by 30% within that sector. CNBC’s survey of analysts predicted growth of 27.7%, while the StreetAccount average was for growth of 27.5%. The preceding quarter’s measure was 29%. Amy Hood, Microsoft’s finance head, stated on a conference call with investors that artificial intelligence was responsible for six points of the growth of Azure and other cloud services.

Chief Executive Officer Satya Nadella stated on the call that Microsoft now has 53,000 Azure AI customers, with one-third having only recently migrated to Azure.

According to Nadella, more pledges to invest more than $1 billion on Azure overall were made during the quarter.

The Productivity and Business Processes division brought in $19.25 billion in revenue, which included Office productivity software, Dynamics, and LinkedIn. That exceeded the $18.99 billion StreetAccount average and was up 13%.

Revenue from the More Personal Computing sector came in at $16.89 billion, up around 19% and somewhat over the $16.79 billion StreetAccount estimate. Xbox, Surface, Bing, and Windows are included in this division.

Source:
https://www.cnbc.com/2024/01/30/microsoft-msft-q2-earnings-report-2024.html

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